5 Deadly Trade Up Mistakes

by : Bruce Swedal

So you're thinking of trading up. This time when you buy there is a new wrinkle. It's not like the last time when you didn't already own a home, this time you already own a home. Not only are there additional considerations for financing your next home, there is the timing issue. Would you rather have the possibility of owning two homes or the dilemma of having to find temporary housing between homes?

Here are 5 strategies to avoid the most common mistakes that homeowners make when moving up. Knowing about them beforehand will give you the opportunity to overcome them by making informed decisions.

The Dream Home: Let's face it, we all dream of improving our lifestyle and moving to a larger home. What prevents us from doing that is the discrepancy between our hearts and our bank accounts. It is easy to drive by a home and find out it is sold or more than you are willing to pay and many home owners get caught up in this hit or miss strategy. Find out if your agent offers a Buyer Profile System or House Hunting Service, which takes the guesswork out and helps put you in the home of your dreams. It takes into account your criteria and all the available homes to supply you with updated information on an on-going basis. This helps to remove those rose-colored glasses.

Making the Necessary Improvements: Are you interested in getting the best price for the home you are selling? Then there are certainly things that you can do to enhance it for the buyer. Fix-ups don't need to be expensive to be effective. Making minor investments can come back to you ten-fold when you get ready to sell. If you don't have the cash, investigate an equity loan that can be repaid when you close.

Sell First: If you don't want to find yourself at a disadvantage at the closing table, sell before you buy. If you don't, you may feel pressured to accept a below market offer to meet a purchase deadline. Selling first allows you to buy with no strings attached. This not only helps your bargaining position in selling your old home, but also in purchasing the new one. It may be possible to sell your current home and rent it back for a short time. Another possibility could be to rent out your current home to put it on the market later.

Get your Mortgage Pre-Approved: Pre-Approval does not cost you anything or obligate you, but many homeowners fail to take advantage. This step gives you a significant advantage when submitting an offer to purchase a home. It lets the seller know that you already have the green light from your lending institution. It helps you ascertain how much home you qualify for and your projected payment. Don't fail to take this important step.

Coordinate Closings: When coordinating two major transactions together with all the people involved like mortgage experts, appraisers, lawyers, loan officers, title company representatives and home inspectors, the chance of a mix-up or miscommunication goes up dramatically. If you want to avoid a nightmare make sure you work closely with your agent.

Keep these strategies in mind and you should have a great experience and remember.

A down market represents an excellent time to trade up. By understanding that more expensive homes typically get hit harder on prices you will get the concept. Let's say homes in a down market have depreciated 5% in value. That two hundred thousand dollar home you are selling has taking a $10,000 hit in value, but that $400,000 home you are purchasing has taken a $20,000 hit in value. It means your overall cost in moving up to your new home is reduced by $10,000. That accounted with the gap reduction between the prices of the two homes. A down market represents the best financial time to trade up.