Five years ago, my wife and I were first-time home-buyers. Now we’ve decided to become first-time home-sellers. My wife is an independent accountant, and a couple of her clients are real-estate agents. One of them is kind of a big shot, a Realtor™ who owns his own company. We’re meeting with him later this week to start discussing things. We know pretty much nothing about what the whole process entails. I’m sure he will answer most of my questions, but a) I don’t want to wait; and b) it’d be nice to hear personal experiences.
First: We bought our condo with a small down payment, like 5%. So we’ve been paying Private Mortgage Insurance every month. We’ve also been paying a little extra towards the principal every month. We’re not quite to the 20% equity point where the PMI will go away, but we’re getting close. Not sure if this will matter, but I thought I’d mention it.
Anyway, Zillow estimates our condo is currently worth $100K more than we paid for it five years ago ($237K). I’m well aware that what Zillow says doesn’t really mean anything. But let’s suppose that we wind up selling the condo for $340K tomorrow. The principal on our current mortgage, as of now, is about $198K. So the sale pays off the old mortgage. A commission around 6% would translate to, let’s say, about $21,000. So we’ve got around $100K for a down payment on a house. Do I have this all correct? Are there more costs I’m not considering?
Second: The condo was remodeled right before we bought it. Everything is still in great shape. Maybe a few minor repairs need to be done. But as far as staging our place, and all that… we don’t have the money to move all of our stuff out and put it in storage for an extended period, pay for staging, and whatever else. Is this going to hurt us?
Third: The whole idea of trying to time selling our condo and buying a house scares the hell out of me. Supposedly my area is a seller’s market right now. Which is great for selling our place, but not so much for buying a house. We won’t actually have a down payment for a house until the condo sells. But it has to happen at the same time. How does this all work?
I’m sure there will be more questions, but I’ll start with these for now.
Closing costs, including a lawyer, will eat up a bit more money.
You’ll want to do some work getting the place ready to show; it will help raise the price or gently nudge potential buyers to make a bid. Removing clutter, personal touches, and excess furniture will make the place look presentable. If you can store stuff for a little while it can help.
You have a few options. First, buy your new place first and carry two mortgages while you get your place ready to sell. But that won’t work if you don’t have the money for the down payment. You might get a HELOC on your current place, pull the money out from that and use it for a down payment. It does cost you some to do this, and you might not get enough from the equity in your current place. A lot of folks simply rent a place for two months while their stuff is in storage and they buy a new place quickly.
We’re signing our P&S today so we’re going through the same things, although this isn’t a first house for either of us. We’re using a HELOC and savings for a 75% down payment, then paying them back as soon as our current place sells.
That’s the bulk of it. There might be other costs as well, but the commission is the biggest (assuming there aren’t repairs that are needed). Here’s a more detailed answer: How Much Does It Cost To Sell A House? | Bankrate
Honestly, yes it will. It is easier to sell (and get higher bids) if buyers can picture themselves living in your place, and that’s harder when it’s filled with your stuff. But the harder question is if it will hurt you more than the cost and hassle of staging it. That will depend on your condo and the local market. Are you going to be competing with other nearby units that are nicely staged, or is everything selling fast no matter what? These are the things that a local realtor can really help you decide,
Usually the buyer pays closing costs, although there are exceptions. And unless you own the condo in a trust or there’s some other complicating factor, you probably don’t need a lawyer.
But your point is well taken - there are going to be other costs of some form. Professional cleaning, some kind of low-key staging (even if you don’t move out or store your stuff), the moving company for when you get the new place. And be sure you are saving some of your profit for all those closing costs on the new house - don’t count on it all going to the down payment.
I carried 2 mortgages between selling house A and buying house B - did it for about 3 months longer than I would have liked and it was scary. The biggest plus was that it allowed me to paint/do minor touches on the new house before there was furniture in it.
In a hot market, the staging matters a lot less than in a down market.
Over almost 38 years. we’ve sold 6 houses. We never hired a stager. We de-cluttered, painted one room that had been dark burgundy, and kept the places clean. In a buyer’s market, staging might be worth it, but in a seller’s market, minimizing your personal stuff and keeping the place spotless should be enough. Tho it wouldn’t hurt to put out a plate of freshly baked cookies.
If the market is really hot, you might have trouble getting another house. In a hot market, it’s not unusual for homes to go for more than the asking price and the winning buyer makes concessions like cash-on-hand and no inspection. It’s not like the old days where the sellers would work with you to wait until your condo was sold. If you make an offer with a contingency on your condo selling, you might not get too many sellers willing to accept your offer. Your agent will be able to give you the scoop on what the market is like in your area.
In our market (greater Boston) houses are difficult to come by. We’ve been outbid on several, and had some snapped off the market before offers were due. So we needed to buy a place before putting ours on the market, and just absorb the dual mortgages for a bit with the knowledge that our place will sell quickly.
In that Alice Through The Looking Glass world that is overheated housing markets, there’s always the Letter that prospective buyers may choose to write to the Seller (a/k/a begging):
We’re in the same situation as you. I posted this a few months ago in a different thread; it’s how our realtor explained the options for buying and selling simultaneously, and I found it really clear and helpful.
Anyone buying your condo will have to do their due diligence on the HOA fees, escrow accounts and special assessments, and lenders can be picky about # of owner occupied units vs investment units.
It will help you to have this info readily available to potential buyers.
To the extent a data point is helpful, I sold a house a couple of weeks ago with a sale price of $335,000 and paid approximately $17,000 in “costs” which included the commission ($14,000), deed preparation/settlement costs, and repairs ($2,000). There were also offsets like real estate taxes (I “owed” them the month of July) and HOA dues (they “owed” me two months).
To address the idea of buying before selling… even if we could scrape up enough for a 5% down payment on a home, I don’t think we could qualify for a second mortgage, based on our debt/income ratio. My gut feeling is that we’ll wind up selling, moving into an apartment, then looking for a house. Ugh.
We’re meeting with the Realtor tomorrow, so we’ll see what he has to say.
Our realtor says he won’t even show us any letters written by prospective buyers because he doesn’t think they should influence our decision. While we did write one letter on one of our first offers, we stopped doing that quickly. Buyers in this market are looking for your interest in their property as expressed in US dollars.
I just thought of something about trying to sell the place… we have three cats!
I have ugly plastic panels all along the tops of the fence in our backyard, so that the cats can go outside but can’t escape the yard. When we put the condo up on the market, that will have to come down, so the cats will no longer be allowed outside.
So how do we deal with that? When buyers are shown our place, we’re not supposed to be here, right? Will we have to pack the cats up in cat carriers and take them with us every time? I don’t imagine we can leave them at home, and put up signs saying “don’t let the cats outside…”
