You’ve decided it’s time to get a bigger place. Or a nicer place. Or a better neighbourhood. For whatever reason, you’ve decided to trade up. There are possible pitfalls and temptations in this transaction that you can minimize. We have made a list of the major steps that you can follow to prevent these mistakes from taking place:
1. You will be tempted to put an offer on the new property prior to selling your existing home. Unless you have the financial resources to buy a new home without selling your existing home, don’t do it. You can make a contingency offer, based on the sale of your home, but those offers are frequently not accepted and if so, the Seller will want more money than if you are a buyer with less "baggage". Also, the sale time on your property is difficult to estimate. And Sellers don’t like uncertainty. Unless you can afford to make two mortgage payments for an extended period of time, don’t put an offer on your new home until your current home is sold.
2. Make sure your home is ready to sell. Your home will sell faster and for more money if you take the necessary steps to make it marketable. Staging is important – the closer your home is to showing like a showhome – the better!
3. Sit down and prepare a realistic budget. Make sure you can really afford this step-up. Don’t be conservative. If anything, pad the numbers to be sure you will be comfortable after the more expensive home purchase.
4. Get pre-approved. Talk to a mortgage broker before shopping for the new home. That way, you won’t be disappointed by finding the perfect home and then discovering you can’t afford the mortgage, or writing an offer and finding the Seller won't consider your offer when you have no pre-approval in place.
5. Coordinate the closings. The sale of your current home needs to close and fund prior to the closure of the purchase of your new home. This requires coordination between many different parties. Work closely with your Realtor to minimize potential chaos at closing. Also, you may want to arrange additional bridge financing with your lender as a back up measure.
Following these steps will help you sell for the most, and be in a position to have the power to buy for the least. Isn’t that what we all ultimately want to do?