Buying a home in today's market, part 2
Should you buy a home if you currently have a home to sell?
Recently, I had the pleasure of doing an adult ed. home buyers class for the Marietta Community School. I have decided to take some of my outline notes and form the into a blog series for home buyers.
The content is geared a little more toward first time buyers but will still be very relevant for move up buyers as well. Also, this is based on my own knowledge and experience in our local market. All real estate is local, so if you are reading this in another part of the country then some of the ideas may not apply or at least they may apply differently.
Should I buy a home if I currently have a home to sell?
This is a real challenge in any market. Not only are you faced with the pricing realities of the current market, you are potentially going to end up making 2 mortgage payments.
- Since there is a chance that you may end up making 2 mortgage payments, then make sure that you are financially able to do so. There are some scenarios where this won't happen. I'll discuss those shortly.
- Accept the reality that your current home is going to sell for less money than it would have 1-2 years ago.
- The upside is that the home you are buying should also be price reduced!
So let's look at a some sample numbers.
Let's say that 2 years ago your current home would sell for $175,000 and your next home would have been $300,000. This would be a pretty common scenario for homes in this area. You pay a difference of $125,000.
In todays market you may have to be willing to sell for a lower price. To keep the math simple lets say that your home would sell for 10% less than 2 years ago. That gives us a discount of $17,500 and a selling price today of $157,500. ( In most areas I honestly believe that you won't have to discount that much but I am trying to be reasonable.)
If the next home has to discount by the same 10% then you are looking at a purchase price of $270,000.
Your difference in the purchase price is now $112,500 and you just saved $12,500! That would translate to monthly mortgage savings of about $75-85.
What are some things to do to minimize the risk?
- Maximize your efforts to sell your current home. Make sure that it is in top condition, marketed effectively, and priced fairly.
- If you are financially able, then I think youll make your very best deal on the second home by making that purchase first, with no contingency to sell the current home. This should put you in a negotiating position to see the most savings on the higher priced house. You will also be in a better position to pick and choose your next home. It also poses more risk since you will end up with 2 mortgage payments (unless the current home is paid for).
- The other scenario is to get a contract on your current home and then shop like crazy for the next one. Make the offer on house #2 contingent on the sale of the first home. This lowers your risk but gives you fewer choices for your next home.
So the basic answer is it might work for you to sell and buy in todays market. I will be glad to meet with you to give you a realistic idea of how much your home might sell for. We can also go look at a few replacement homes so you can see what is out there and ultimately make the decision that is best for you and your family.
coming up: part 3 will be "Getting credit ready". part 4 will be "How much house can I afford?"
Read Part 1, Here - Is it a good time to buy and should I buy?
Read Part 2, Here - Should you buy a home if you currently have a home to sell?
Read part 3, Here - Getting Credit Ready/ How much house can I afford?
Read Part 6, Here - Appraisal, Inspection, and Due Diligence
Read Part 7, Here - To the closing and beyond
Bob Southard, e-Pro, Realtor ®, Solid Source Realty, Inc. Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga
Visit my website www.AgentBobSells.com
Call me for all of your Real Estate needs
Copyright © 2008 By Bob Southard, All Rights Reserved