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As an engineer and Six Sigma consultant, Chris Moore is–to put it mildly–a pretty detail-oriented guy. So when time came for the Floridian to trade up to a pricier home, he and wife Marie attacked the task with zeal. “We developed a matrix,” remembers Moore, 33, of the family’s 2004 move. “It had to be close to the beach, close to work, in a good school district, and in our price range.”
Luckily the couple found just that, in a $313,000, two-story gem in Jupiter, Florida, which was $113,000 more than the value of their previous home in Orlando. After sinking $40,000 into high-end renovations, Moore now estimates the house would sell for around $425,000. With four bedrooms, a short bike ride to work, and a mere block from the ocean, it truly feels like home for the couple and son Perry, 7, and daughter Lily, 3. “It’s so nice to be able to walk out on the beach at night,” he says.
With the softening of the real estate market, you may be contemplating trading up to a bigger and better home. While the Moores made their way through the process quite skillfully, if you’re not careful, trading up can become a nightmare, because it’s a process fraught with potential pitfalls. A few pointers from the experts:
1. When in doubt, sell first. “You don’t want to risk taking on two mortgages at once,” says Brad Inman, publisher of real estate newswire Inman News. “Make no assumptions about being able to sell your house, because if you can’t, it could really put you under water.” By selling first, you can also use the equity from your first home to come up with a down payment on the second. The exception is a buyer who’s very financially comfortable, who could carry two mortgages without breaking a sweat.
2. Consider a “rent-back.” If you can’t arrange a near-simultaneous closing of your old and new homes, you can arrange to stay in your old place until you find just the right trade-up. “You can rent it back for 30, 60, or even 90 days,” says Dale Mattison, a realtor with The Mattison Group in Chevy Chase, Maryland. “It’s much more convenient than going out and finding another short-term rental.”
3. Make renovation work for you. There are two ways that targeted renovation can make trading up a more feasible goal. Maximize the value of your current home with critical updates like bath or kitchen remodels, which will both boost the sale price and help it sell faster. And for a bargain in your new place, look for a home with good bones where a minor oversight–like a decaying paint job, say–has left it lingering on the market. To figure out which projects are worth your while, check out the annual Cost vs. Value Report at www.remodeling.hw.net.
4. Minimize the damage. Deploying the equity in your first home toward a big down payment on your second home, instead of frittering it away on other purchases, will ease the