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You’ve started to notice the signs that it’s time to upgrade from your starter home. Your space is feeling cramped. Your family’s growing but your home isn’t. And you’ve made some smart financial moves that have put you in a good position to trade up.
Of course, selling a home and moving into a new one can feel like an overwhelming process. And you want to do it right. 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 top real estate agent can perform a market analysis and give you a ballpark idea of what your house will sell for based on similar sales nearby. Or, you can try your hand at HomeLight’s home value estimator tool which gives you a data-backed real-world valuation for your property.
Keep in mind, though, that your listing price isn’t the profit you’ll walk away with when you sell your home. There are costs associated with selling a home, including agent commissions, transfer taxes, closing costs, and the expense of preparing your home for sale.
These selling costs will eat into your profits, and unfortunately they don’t come cheap. In fact, they can account for up to 10% of your home’s sale price. According to recent data from Zillow, the average cost to sell a home in the U.S. is $20,851.
Set 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% down).
Further 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 should improve your credit score as much as possible.
The good news is, you don’t necessarily need a perfect score to get a competitive mortgage rate. If you’re hoping to score the best rate possible, you should aim for a credit 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 mortgage approval process. You don’t want a small move to cause a credit score drop.
For example, if you’re planning on buying 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%. 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% 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 your payment is due. When you know this information, you can make sure your card utilization stays under 30% 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.
You’re still in the planning phase, so now is a good time to gather up your financial documents like tax returns, pay stubs, 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 it comes time to mortgage your dream home.
Make a wish list
One of the main advantages of upgrading 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 the time to hone in on your list of musts: 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 home’s resale value in the future.
Step 2: Sell 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 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 someone you trust, great! If not, find a real estate agent that has your best interests in mind.
It’s best to go with an 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. And it’s a good idea 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, that’s not always the case.
Winter can bring highly motivated buyers. Plus, listing your home during an off-peak selling season means your agent and mortgage lender will have plenty of time to give you individualized attention.
If you’re selling in spring, that comes with its own set of advantages, too: Buyers oftentimes have a financial boost thanks to tax returns, and the warmer weather may bring more people to open houses.
The bottom line? There’s no wrong time to sell your home. Choose the timeline that works best for you.
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. This service will come pick up your belongings for you, store them in a climate-controlled warehouse, and then re-deliver them to you when you need them.
Bonus: 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?
According to a 2017 study from the National Association of Realtors, a whopping 77% of buyers’ agents said staging a home made it easier for a buyer to visualize the property as a future home.
Staged homes, most of the time, sell for 6% to 25% 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 often rent furniture and home decor that appeals to a broad base of buyers.
Step 3: Buy your new home
Here comes the fun part! It’s time to find your dream home and start writing the next chapter of your story. Here are some steps to take to help:
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 inspire you, you should imagine the home without the fancy furniture and decor and make sure any offer you make reflects its true worth.
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, 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% 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 agent’s expertise as they 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 stand out 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, the inspection 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. 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.
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
Moving day! 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 the 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. Use towels in place of bubble wrap where appropriate.
And don’t forget to change your address with the USPS. When you put in your request, they’ll usually mail you a packet of coupons to moving-related businesses.
Header Image Source: (Rustic Vegan/ Unsplash)