You’ve started to notice the signs: It’s time to upgrade from your starter home. Smart move. It’s true, now is a great time to make the transition and upgrade your home. Interest rates are projected to rise in 2019, so it makes financial sense to make your next purchase while rates are still low. Also, the luxury home market is currently favoring buyers, while the starter home market is on the side of sellers. It’s a win-win for those looking to upgrade, and making the upgrade now could potentially save you thousands of dollars.
Of course, selling a home and moving into a new one can feel like an overwhelming process. To help, we’re breaking down steps with helpful tips to make the upgrade process more seamless:
Step 1: Make A Budget And Determine Your Family’s Needs
If you’re starting to get serious about putting your house on the market and searching for your dream home, then setting a budget and evaluating what’s important to you and your family is an important first step. The following are a few important things to think about during the planning stages:
Get An Idea Of How Much Your Home Will Sell For
A realtor can perform a market analysis and give you a ballpark idea of what your house will sell for based on similar sales nearby. This will clue you in on how much profit you can expect make on your home. The good news? The market is on your side and you’ll likely field competitive offers for your starter home. In both Denver and San Francisco, for example, the average home price has gone up roughly 8 percent in the last year alone. On the expense side, the average cost to sell your home is $18,342, according to a study from Zillow, and that figure includes the cost of preparing to sell your home, commissions, and transfer taxes.
Make A Budget For Your New Home
As you’re setting your budget for purchasing a new home, give yourself some breathing room by planning for the unexpected. Unforeseen expenses can arise in your closing costs. These “surprise costs” can include miscellaneous service fees, home inspection costs, and private mortgage insurance (for buyers putting less than 20 percent down). Furthermore, knowing property tax rates and planning for HOA dues will help you draw up a more accurate budget. HOA dues go towards maintaining common areas, so keep in mind that neighborhoods with pools, community buildings or gated fences will tend to have higher fees.
Pull Your Credit
First thing’s first: before buying a home, you want to get your credit score up as high as you possibly can. But you don’t necessarily need to worry about getting a credit score in the 800s to score a competitive mortgage rate. f you’re hoping to score the best rate possible, you should aim for a score of 760 or higher. Also, some of the free, third-party credit reporting agencies tend to inflate your scores, or they may not give a complete picture of your credit profile. For that reason, it’s best to get your official credit score that includes reports from all three major bureaus. You can pull your scores for free once per year.
Get (Or Keep) Your Credit In Tip Top Shape
If you already have a strong credit score, the name of the game is to keep it that way. If your score could use a little work, we’ve got some tricks for bumping it up. Because credit can be fickle, you’ll want to keep your score as stable as possible while you’re going through the approval process. You don’t want a small move to cause a credit score drop. For example, if you’re planning to buy a new home in the next few months, don’t take out any new loans, like a credit card or car loan. Taking on more debt can affect your debt-to-income ratio and might cause a dip in your credit score. Also, you’ll want to keep your credit balances below 30 percent. When you go over that threshold, it can signal to creditors you’re overextended. According to FICO, a widely used credit-scoring system, credit utilization makes up 30 percent of your score. Pro tip: Check with your credit card companies to find out what dates they report to the credit bureaus. You might be surprised to learn it’s not always the same date as your payment is due. When you know this information, you can make sure your card utilization stays under 30 percent and creditors know you’re using credit responsibly.
Apply For A Conditional Approval
In today’s competitive real estate market, it helps to set yourself apart as a highly qualified borrower. Pre-approval letters are a good first step, but getting one doesn’t exactly guarantee that you’ll secure financing. That’s because pre-approvals are often based on self-reported or incomplete financial information. By doing your mortgage underwriting upfront, before you even shop for a home, you can show home sellers you’re a serious buyer who’s ready to close. At Eave, we fully review your finances within one business day. When you’re ready to start shopping for a home, having a conditional approval that’s been fully underwritten can help you beat out the competition — even all-cash buyers. Now is a good time to gather up your financial documents like tax returns, paystubs, bank statements, and investment statements, and have an organized folder ready for the mortgage approval process. You’ll be far more prepared and ready when you shop for your dream home.
Make A Wish List
One of the main advantages of upgrading from your starter home to a luxury home is that you don’t have to make as many compromises. You can have a big walk-in closet and spacious kitchen without knocking a large back yard from your wishlist. Now is really time to hone in on some of the big ticket items on your wish list. Do you want to live near a golf course? Do you want to shorten your commute to work. Will you need a space for a home office because you’ll be starting your own business or working from home? How about that Pinterest-worthy bathroom with a generous bathtub to relax in on self-care Sundays? Put it on the wish list!
Consider School Districts
For many families, school districts are of prime importance. Your real estate agent will have a good idea of what neighborhoods feed into great schools. If you’re looking to do some research on your own, though, here are a few questions to ask yourself in the process: “What’s the teacher-to-student ratio?” “What are graduation rates and how do they compare to statewide rates?” “What extracurriculars are offered?” Even if you don’t have school-age kids, buying in a good school district is a good idea because it will help with your resale potential in the future.
Step 2: Selling Your Home
Now that you’ve got an idea what your dream home looks like, it’s time to get your starter home on the market and begin prepping for a move. First, let’s take a moment to celebrate your starter home! It surely holds lots of great memories and it’s been working hard for you to build equity and increase in value so that you can take this next step.
Build Your Dream Team
Now it’s time to build the roster for your real estate dream team, with a great real estate agent serving as the captain. If you’ve already built a relationship with a realtor you trust, great! If not, find one that has your best interests in mind. You can start by taking referrals from friends and family members. You may even want to get a recommendation from any former neighbors who have had success selling in your neighborhood. It’s great to go with a real estate agent who is familiar with your neighborhood. Remember, buying a home will likely be one of the biggest financial decisions of your life, so it’s good to be prudent in your search for a real estate agent. You absolutely can interview agents over coffee. Ask them how many other sellers they’re working with presently to ensure they have the bandwidth to sell your home. It’s even OK to ask them for references.
Up Your Curb Appeal
You know what they say about first impressions! Before that “For Sale” sign goes up, spruce up the exterior of your home. Some simple steps, like updating the hardware on your front door (or polishing it), can go a long way. Some other easy steps include giving your door a fresh coat of paint, adding a rocking chair on the porch to create an inviting space or adding some potted flowers.
Decide When Your Home Will Hit The Market
You may have heard winter isn’t the best time to list a house. But, because we’re in a seller’s market for starter homes and there are more buyers than there is inventory, winter is still a great time to sell. Plus, seasonality doesn’t have too much of an effect on markets like Denver (where the sun shines 300 days a year and snow often melts in a day) and San Francisco, which experiences moderate temperatures. Financially, it’s a good idea to take advantage of it being a seller’s market so you can move the equity you’ve gained from your starter home into your luxury home. If you’re getting your house ready to sell in the spring, that comes with its own set of advantages, too: Buyers oftentimes have a financial boost thanks to tax returns and warmer weather may bring more people to open houses. The bottom line? There’s no time like the present, especially since the market is great for your upgrade.
Declutter And Get A Storage Unit
We know, it’s hard to be objective! But, take a look through your house and try to imagine it through the eyes of potential buyers. Start decluttering and de-personalizing your home so that buyers can envision their own lives in your home. You can donate household items and clothing to local charities, and some will even pick them up at your doorstep saving you time. (Be sure to save the donation receipts so you can potentially take a deduction come tax time). For belongings that you plan to keep, but want to clear out before your home is staged, you can rent a storage unit or use a service like Closetbox that will come pick up your belongings for you, store them in a climate-controlled warehouse, and then re-deliver your items when you need them. Getting a start on decluttering will help make the moving process even easier.
Stage Your Home
Did you know that staging your home could help it fly off the market even faster and help your home sell for more money? Seventy-seven percent of buyers’ agents said staging a home made it easier for a buyer to visualize the property as a future home, according to a 2017 study from the National Association of Realtors. Staged homes, most of the time, sell for 6 to 25 percent more than homes that have not been professionally staged, according to Home Staging Resource, a staging and redesign training company. Professional stagers make sure your home feels inviting, but not too personalized, and they’ll oftentimes rent furniture and home decor that appeals to a broad base of buyers.
Step 3: Buying Your New Home
Here comes the fun part! It’s time to find your dream home and start writing the next chapter of your life. Here’s some steps to take to help you find your dream home.
Give your real estate agent your wish list and start narrowing down neighborhoods that interest you. Be patient; according to Realtor.com, the average homebuyer will look at 10 different homes over the course of 10 weeks. Remember, clever staging can affect home prices. While a professionally staged home can help you envision your life in a home and inspire you, you should imagine the home without the great furniture and decor and make sure any offers reflect that. On the flip side, if there are cosmetic issues you don’t like — say a paint color you wouldn’t have chosen — remember that those are easy fixes. Ask yourself whether the home will fit your lifestyle, whether it has enough space and if it’s in a location you like.
Put In Offers
When you’re putting in offers, and doing so in a competitive market, you don’t want to go too low. In fact, low balling an offer might even offend the seller. Generally, 90 percent of the asking price would be considered a low offer. You may have some flexibility to go with a low offer if the house has been on the market for a few months. You’ll want to rely on your real estate agents expertise as he or she can run the numbers on what similar homes have been selling for nearby. Got your heart set on a home? It might be worth writing a buyer’s letter, complimenting what you love about the home. Keep it short and sweet. Along with strong financing, the letter could help you standout if the seller is reviewing multiple offers.
Go Through Inspection
A solid home inspection offers insurance against any expensive surprises that could come up. If there are some serious flaws, and you have an inspection contingency, you may be able to walk away from the deal without facing any penalties. Most often, though, it allows you to ask the seller to make certain repairs and fixes before you move in. Home inspectors can look at cracks in the wall and determine whether its a cosmetic issue or indicative of a structural problem. They’ll also be able to determine important factors like the condition of the roof, whether there are any electrical concerns that could be fire hazards and whether the home’s heating, ventilation and cooling system (or HVAC) is functioning properly. Home inspectors have hundreds of items on their checklist. Accompany the home inspector and be prepared to ask questions or point out anything that looks “off” to you.
Get To The Closing Table
Congrats! You’ve made it to the closing table. Eave can help you get to the closing table within 21 days (often sooner!) During this process, you’ll want to get your contingencies squared away. (Contingencies are clauses in real estate contracts where conditions need to be met, like financing or a home appraisal, before the sale can be completed). If you’re an exceptionally stronger buyer, you may qualify for a “High Certainty” program” where we support you in removing certain contingencies to help strengthen your offer. Other common steps when you’re closing include clearing the title, setting up an escrow account to cover property taxes and homeowner’s insurance and doing a final walk through and signing lots of paperwork.
Make Your Move
Make your move seamless by hiring licensed professional movers. While it’s sometimes hard to know the exact date of your move, it’s a good idea to book movers as far in advance as possible, especially during spring and summer months when they tend to be their busiest. When it comes to packing, instead of buying boxes, take a green approach and collect boxes from local bookstores (they tend to have sturdy ones) and your local liquor stores (they have compartmentalized boxes). Also, you can get creative with your packing and load up your suitcases, coolers and hampers, too. Towels can be used in place of bubble wrap in some instances. Don’t forget to change your address with USPS. When you put in your request, they’ll oftentimes mail you a packet of coupons to moving-related businesses.
One final note: Congrats! Deciding to upgrade is a big decision, but one that allows you to move in to the luxury home of your dreams.