Even if this is not your first real estate transaction, there are still a few things that can complicate your life. Maybe some of these factors did not cause any problems during the first transaction but you should not neglect anything during the second transaction.
Not only do you have to think about the financing but you have to sell the house that you currently own at the right time in order to avoid the financial burden of two houses, or worse, the dilemma of having nowhere to live while the two transfers of deed are taking place.
In this document, we highlight the five most frequent mistakes owners make when buying a new property. Knowing these mistakes and the strategies to avoid them will help you make informed decisions before putting your house for sale.
Rose Coloured Glasses
Most of us dream of a better lifestyle and to move into a bigger or more luxurious house. Unfortunately there is often a discrepancy between our heart and our bank account. You fall in love with a property that you saw in your neighborhood but it’s already sold or you can’t afford it. Many owners fall into the draining house hunting spiral while there is a much easier way to proceed. For example, see if your agent offers a “Personalized purchase system” or the service “Houses alert” which eliminates the « trial and error » process and helps find the house of your dreams. These types of programs allow you to align your personal criteria with ALL the available houses on the market (as they are listed on the market). Such programs allow the owners to remove their rose coloured glasses and see the real world – and move into the house they’ve been dreaming of at an affordable price.
Ignore necessary improvements
If you want to obtain the best possible price for your house, you have to do some work to improve the perception of the potential buyers. The repairs do not have to be expensive, but if you accept to invest a little, you might leverage your investment by ten times or more when you sell. It is very important to do these improvements before putting your house for sale. If you don’t have enough money, it is possible to get a loan, which you will be able to repay once your house is sold.
Do not sell first
You should plan to sell before buying. Then, you will not find yourself in a weak position at the negotiation table, feeling obliged to accept an offer lower than market value because you are facing purchase delays. If you already sold your house, you can buy your new house with peace of mind. If you receive an interesting offer for your house but did not start looking seriously for another one, you can insert a provision in your promise to purchase to make it conditional to buying another house, thus giving you some additional time. If the market is weak and you find that you can’t sell as fast as you thought, you can rent your house and put it back on the market later, particularly if your house is small which is ideal for a first time owner. In this case however, don’t forget to get information on the tax impact of such a decision.
Go without a pre-approved mortgage
Several owners ignore the considerable benefit of a pre-approved mortgage. It does not cost anything and there are no obligations. It gives you an important advantage because you know your acceptable price range while looking for a house, but more importantly, it confirms to the seller that you have the required funds to buy the property. With such an advantage, your offer will be perceived much more favorably by the owner seller, even if your offer is slightly lower than the one of a non-qualified buyer. Don’t miss such a valuable opportunity.
Lack of coordination between the two transactions
With two major transactions to coordinate and all the people involved (mortgage brokers, notaries, building inspectors, real estate brokers), the risk of miscommunication and oversights increases considerably. Make sure you collaborate closely with your broker to avoid a logistic nightmare.