Move up buyers make up over 26% of our buyers market. Usually move up buyers are increasing their square footage, changing neighbourhoods, or upgrading the quality of home for long term investment potential. There are some things to consider if you're thinking of making this type of move.
1) How big of a "move-up" move should you make?
Moving is expensive. Having said that, a different house can be an excellent long term investment if you're in a better neighbourhood with a home that will appeal to more buyers down the road when it's time to re-sell. Make the move count! Lateral moves are expensive.
In BC there is Property Transfer Tax (1% on the 1st $100,000 of purchase price and 2% on the balance) to budget for. You'll also be looking at legal fees, real estate fees, moving costs and utility set-up costs. Don't forget your utility bill may increase if you've got more square feet to heat and cool and also your Property Tax will be higher with a more expensive home. Consider what your new mortgage payments will be on a larger mortgage too. If you need a larger home but are tight on your budget, look at different neighbourhoods.
2) Make a list of pros and cons
What do you love AND hate about your current house and your current neighbourhood. Consider your favorite parts of the home and how they impact your life. Has the ensuite kept your spouse happy? Make sure it's on the list for your upgrade! We all know about location, location, location but be sure to analyze what your current neighbourhood has to offer. Do you love the walkability of your current location or are you looking for a more rural feel with lots of green space? Consider your long term plans and goals and if housing is important be sure to address it in your list of pros and cons.
3) Consider the type of homeowner that you are
One of the top reasons people upgrade is for more space. Be sure to look closely at how much space you really need. Paying a mortgage on the extra 2 bedrooms you don't need is expensive, not to mention the increased utility costs. We often see "luxury stars" in our clients eyes who later regret having the space they thought they wanted, but don't really need.
Also, now is the time to be honest about your home ownership habits. Do you keep on top of maintenance issues religiously or do you tend to neglect and turn a blind eye to those pesky jobs needing to be done? If you don't like the responsibility of maintaining a home, perhaps it's time to look at a townhouse situation where some of the big jobs are looked after. If you don't like yardwork, be sure to stay committed to looking at upgrading to homes with smaller yard footprints. Easier said than done, but if you prepare in advance it's easier to stick to Plan A that slip off to Plan B.
4) Money and mortgages
Mortgage money has never been cheaper and a good rule of thumb is to calculate about $450 for every $100,000 of mortgage money. It's time to put pen to paper and see how much more of a monthly payment you can be comfortable making without compromising your lifestyle. Being "house poor" is nasty. Making a good investment decision to upgrade is the plan, so make sure you know exactly what you can afford before taking the plunge.
5) What do I do first? Buy or Sell?
This is the number one question we get asked when people are looking to upgrade. The answer varies depending on circumstances but read on for some common sense advice and tips!
The most cost effective way to purchase if to have cash in hand. When buyers make a "subject to the sale of" their home offer, sellers don't get excited that their house is sold because yours has to sell first! Buyers will typically pay about 2-7% more for a house with a "subject to" clause. Ironically and historically if you're a buyer with a "subject to the sale of" offer in, you'll also usually end up taking approximately 2-7% less on your current house sale because you're anxious to sell to ensure you get the home you've offered on "subject to" yours selling. That adds up to a fair bit of change!
Upgrade buyers worry if they sell their house first they'll be rushed to find their next perfect home. Not usually the case. By negotiating a long closing date you can often give yourself 90-120 days (and sometimes even longer) to go shopping. It may not feel like a long time, but it's plenty. In 28 years of selling real estate I can still count on one hand the number of times my buyers were not able to find the right house. Even those situations had a happy ending as those sellers packed up their storage bin and moved into a short term vacation rental! Relax and roll with it. Upgrading should be a good experience. Trust in our experience and believe it will happen because it will!
6) How do we know if it's not the right time?
If you find you're straining financially when you go through these suggestions, now might not be the best time for an upgrade. If you're on the fence, considering putting aside the extra mortgage money you'd be paying on your new mortgage and after trying it out for a few months, and it's comfy, you're good to go! And you have the added bonus of having some more money saved up.
We help move up buyers all the time. Give us a shout or send a quick email if you want to chat about your own possible options.