Need to upgrade?
There are different reasons for upgrading. It could be moving out of your little love nest as the family is about to expand. The cute 2 bedroom cottage has been perfect for you but now that number 2 child is coming along, you find you need more room. When the children become teenagers, separate living areas become a necessity. Or, it could be to accommodate the ageing parents. Whatever the reason, you have made the decision.
The big decision now, is how to go about it?
Do you Buy before you sell? If you are in a financial position to do this, great. It means that you can locate and purchase the new home before you sell. You may even decide to not sell your existing home and keep it as an investment.
A lot of people cannot do this, or choose not to put themselves under financial burden in order to do it this way. The only option for them is to buy a property “subject to the sale of their current property” This decreases the negotiating ability you have on the purchase. You may find you will need to pay top dollar, as this is a risk for the seller – waiting and hoping that you do sell your property. They may even place a “Sunset Clause” on the contract. This means they are still on the market for other buyers to come along. Another negative to this way is that you are then putting yourself under time restraints to sell your existing property. This could mean accepting a lower offer. By doing it this way, you could possibly lose at both ends of the transaction – Paid too much and sold for less. You may decide to reject the offer on your home and then lose out on buying the new one. It’s a no-win situation.
The answer is Sell before you Buy.
Placing your property on the market, advertising on the major real estate sites, does not mean you have to sell your property. You can advertise with ReDIY.com.au, on RealEstate.com.au and Domain.com.au and see what offers you receive. Remember, everything is negotiable. The selling price is not the only factor when negotiating. The terms and conditions are negotiable. You can request a long settlement, in order for you to find a suitable property to purchase. Both transactions can settle together. You can move from one home, straight to the other. This way you know exactly what you will receive for the sale and you can then determine what to pay for the new property. You are in a much better position to negotiate a better purchase price because you have your buyer locked in – Not subject to sale, just subject to both settling together.
When Selling and Buying together, what is most important?
The most important thing to focus on, is what you are trying to achieve. Let’s say, your objective is to increase the mortgage by $200,000 only. This is your focus - $200,000. You need to factor in the selling and buying costs – Agents' commission on the sale, stamp duty on the purchase, solicitor costs, removal costs, building and pest inspection costs. You sell for x, costs are y, plus $200k = your purchase price. This is your budget when looking for your new home.
Determining the value of your existing home.
Many people sell property only once or twice in their lifetime. It can be a minefield if you get the wrong agent, the marketing does not work, the agent does not follow up and so many other pieces of the puzzle just don’t fit. However, you can always ensure this does not happen by taking it into your own hands to sell your property.
One of the most important parts of selling your property yourself is to have your price expectations close enough to where the buyers are going to see the value.
There are a handful of methods that you can use to determine the value of a home. The most respected and common method is by completing a comparative or competitive market analysis.
A competitive market analysis or as it is known – a CMA -is an in-depth evaluation of recently sold “comparable” homes in the past 0-12 months. It should also include a list of properties that are currently on offer because this will be your competition when you list for sale.
A CMA isn’t a crystal ball. It will not tell you what your property will sell for. That is what a willing and able buyer will determine and what a genuine seller will accept. However, a CMA should greatly narrow the sale price.
A professionally completed CMA will take into account many features of not only the property but also the local area and neighbourhood.
Here is a list of some of the considerations:
- Block Size
- House Size
- Number of bedrooms and bathrooms
- Improvements and extensions
- Additional living areas
- The quality of the property
- The layout
- The Outlook
- The location in terms of living conveniences.
All of these will add value and need to be taken into account. But, here is a point I would like to make about all these features. At the end of the day, it may just be one or two of these that will entice the eventual buyer and in some cases, it might not be an obvious one. As the current owner, ask yourself, what it was that attracted you to the property? That is what will likely attract the next owner. Whatever that feature is, should be highlighted in the marketing.
It is a funny thing about value – the value of anything is different for everyone. It depends on how much they desire it, how much they need it and how much demand there is for it.
Valuation is not an exacting science. For that reason, you can ask 10 qualified people to value your property and you will get 10 variations. Don’t think of the value of your property as a single figure. Think of it as a price range. That way you are less likely to be disappointed with the final outcome when you do sell.
You can also obtain a Property report on the property that you are thinking of purchasing. The Sell first, then Buy strategy is the way to go. It will be a stress-free experience and one where you will not get any nasty surprises. You know exactly what you have sold for before you buy. No financial surprises.
All the very best on your new venture.