Are you moving homes this year?
If you live in the United States, there’s a good chance you might be. Between 2012 and 2013, 35.9 million Americans, roughly 9% of the population, moved residences, according to the U.S. Census Bureau.
Despite the frequency with which many Americans move, few will tell you the process is stress-free. Rather, homeowners migrating for work or other reasons juggle a variety of tasks, including selling their home, searching for a new one and qualifying for financing — all within a short period of time.
Because of the complexity of the relocation process and the stress involved, migrants who are better informed on the vagaries and quirks of the home-buying and selling process are often the most successful, both in terms of the deals they’re able to score and the anxiety they’re able to avoid.
Here are seven things all buyers and sellers should know when moving homes.
1. Use a professional real estate agent
Inevitably, one of the first ideas that pops into price-conscious buyers’ heads is to forgo a realtor to avoid paying them a fee.
“A lot of people say, ‘I can just do that myself,’” says Bill Mulholland, owner and director of American Relocation Connections, an organization that helps companies and government agencies relocate their employees.
There are a number of reasons why that’s a bad idea, Mulholland says, one of which is that buyers and sellers probably don’t know as much about real estate law as they think they do, regardless of how much time they spend on the Internet.
“Don’t try to learn an entire industry to save some money up front when it could end up costing you a huge amount of money on the back end,” Mulholland says.
Real estate agents are indispensable when it comes to understanding the ins and outs of local housing markets and communities.
“You need to make sure the community is growing,” says Kathy Phillips, a sales associate with The Georgia Club in Athens, Georgia. “Buyers should make sure neighborhoods have strict architectural guidelines in place so developers can’t come in and build something substandard to what they’re purchasing.”
A good realtor will be your main confidante and a much-needed sounding board during the entire relocation process, Mulholland says. He or she will tell you everything from how to price your home so it doesn’t sit on the market unsold for a year (jeopardizing your relocation), what lenders to speak with to receive financing and what paperwork to fill out so your kids can start school on time.
Plus, local realtors have networks of professionals to consult with every step of your purchase or sale.
“When you buy a home, you’re dealing with at least 15 different people, like appraisers, two realtors, home inspectors, lenders, underwriters, counties, municipalities and others,” Mulholland says. “You have to orchestrate all of these parties so they can come together at once to make the transaction happen.”
“You never want to leave money on the table, or overpay, which is why it’s important to find someone who knows what they’re doing,” he adds.
2. Don’t leave it all to the agent though; do your homework
As invaluable as your agent is, you as a buyer need to take an active role in the search process as well. Both online and offline, you should learn as much as you can about the home-buying process.
“Web appeal is the new curb appeal,” says Leslie Piper, Realtor.com’s housing specialist. “Today, more than 90% of the consumers who are looking for a home will go online to look for one. If you don’t have excellent photos of your home, and it doesn’t shine online like the other properties out there, you’re going to be at a disadvantage.”
Here are five sites and tactics that can help you learn about prospective homes and communities.
Niche: Niche is an online warehouse of user-generated reviews of neighborhoods and schools. The site also includes plenty of data on demographics, crime, income and weather.
Homeowners associations: If your town or neighborhood has a homeowners association, visit its website to learn about rules, like overnight parking regulations, that might affect you and hot-button issues the neighborhood is discussing.
Homezada: Homezada helps buyers and sellers share documents and photos about their homes. If you’re moving across the country and don’t have time to spend a month viewing homes, use Homezada as a preliminary tool to pre-select residences you might want to view at a later date.
“When people relocate, and their new job starts in 30 days and they have two weeks to find a house, the time to do search, discovery and evaluation is much more compressed,” Homezada’s founder John Bodrozic says . “The time compression and distance factor makes doing digital research much more important.”
Google: Don’t overlook the usefulness of a simple Google News query on the neighborhood, town or city to which you’re considering relocating. Those search results inform you about ongoing trends and recent events in communities.
YouTube: Do you only have a month to move across the country? Find a realtor in your new city and ask if they’ve uploaded any home or neighborhood tours onto YouTube. It’s a fairly common practice in the modern home-buying process.
“If you’ve gone online and seen a video of a home located on a particular road, ask to see a video of what it’s like driving down that road,” Sharon Gould, a realtor with Coldwell Banker in Sarasota, Fla., advises. “Do the neighbors look like they look after their lawn? Is it a neighborhood you’d want to live in?”
3. Don’t immediately jump at a realtor’s offer to lower his or her commission
The standard commission a realtor receives for a home sale in the United States is 6%, which the seller’s agent typically splits 50-50 with the buyer’s agent.
Many times, however, sellers’ agents offer to lower their commission — saving you, the seller, 1% or possibly more in exchange for the opportunity to represent you in the sales process.
While that offer might tempt you, especially if you’re moving on a tight budget, there are consequences to fee negotiation that could compromise your home sale.
One is the amount of people brought in to tour your home. If your realtor lowers the fee on your home to 5% and says they’re going to split that 5% evenly with a buyer’s agent, they’re limiting the pool of agents who will want to show clients your home.
“They may not be doing you any favors because the other realtor is going to look at that listing on the MLS (Multiple Listing Service) and go ‘I only get 2.5% if I show this house and everyone else is paying 3%,’ ” Mulholland explains.
“They may not want to show that house,” he adds. “You want to be competitive like every other home, so there’s no reason a realtor wouldn’t show your home.”
Another consequence of a watered-down fee, Mulholland says, is fewer resources for your agent to market your home. This is especially critical in down markets where your agent may agree to represent your property for as little as a 1% commission.
“If your realtor will agree to do 1%, by the time they get done paying their agent and taxes, there won’t be a lot of money left,” Mulholland says. “How are they going to afford to spend money on professional photographs of your home, virtual tours, brochures, lock boxes or signs in your front road? It costs 1% on average to market your home like it needs to be marketed.”
“Try to save money, but pay enough so you don’t hurt yourself on the back end with a lower sales price,” he advises.
4. Don’t put the cart before the horse: Sell your home and then focus on purchasing a new one
Because the prospect of moving can be so exciting, many people make finding a new home their number one priority in the relocation process.
While it’s certainly helpful to research prospective neighborhoods and homes, a relocating homeowner’s first task should be to sell his or her existing home, Mulholland says.
Not only does that strategy, in many cases, free up the capital needed to qualify for a mortgage on a new home, it also ensures that a homeowner won’t be paying two mortgages at once in the event his or her home sits on the market for months.
“If the economy crashes tomorrow, you need to be prepared to weather the storm and own two homes,” Mulholland warns. “What if you can’t find a buyer or a renter?”
If you’re relocating under the pressure of a deadline and don’t have time to sell your home before you move, Mulholland suggests either renting in a new city or coming to a rent-to-own agreement with the owners of a home you’d like to move into once your current home sells.
“You take occupancy of home, pay rent covering their mortgage, sign a sales contract and make the closing date as soon as your home sells,” Mulholland explains.
5. Secure financing for your new home now, not later
While it isn’t wise to purchase a new home before you’ve sold your current dwelling, it’s always a good idea to get started on the financial research and paperwork you’ll need to complete to be approved for a new mortgage.
Buyers should speak with lenders about the documentation and credit requirements for the home they’re interested in before their other home sells. Ultimately, they should aim to be as close to pre-approved for mortgage as possible when they put an offer on a property, says Steven John, president and CEO of HomeServices Relocation, which specializes in helping companies relocate employees.
“It isn’t more difficult to get approved for a loan today than it was five years ago, but it is more time-consuming,” John says. “Because of the amped-up criteria and due diligence that’s required on the lender’s part, you want to engage lenders as early in the process as you can.”
“Get pre-approved and get all of your documents in early,” he adds. “That way you have enough time to address anything that may come along.”
Another important step in securing financing, John says, is to keep your finances steady during your relocation process.
If you’ve been pre-approved for a new mortgage, but then take out a $30,000 auto loan because you’ll now be commuting to work and buy $10,000 worth of furniture on credit because you’re moving into a larger home, your lender will likely have to redo your underwriting, further dragging out (and possibly jeopardizing) an already time-consuming and delicate process.
6. Think long-term when purchasing a new home; don’t rush and definitely don’t let emotions influence your decision
You’re looking for a new home, and you and your spouse have your hearts set on what you think is the perfect house.
How perfect is it though? Will it be ideal 20 years from now, both as a place to live and as a financial investment?
Those are the level-headed, prescient questions that real estate experts urge potential buyers to ask themselves before they purchase what they think is their dream home.
One error dewy-eyed buyers make is purchasing a home that works for their current needs but not future ones. What if, for example, you want to increase the size of your family a few years after you’ve settled in, or an aging family member moves in? Moving is expensive and you’re not always guaranteed to sell your home for more than the price for which you purchased it.
“It costs, at a minimum, 10% of the price of your home to move out of it and into a new one,” John says. “You want to buy a home that’s going to work for you for a few years, so appreciation catches up and helps you get into a new home.”
Even if you don’t have kids, it’s also a smart strategy to move into a neighborhood with good schools, John adds. This way, if you end up having children, great schools are close by. If you don’t, living near a good school district will always increase your home’s value.
Most importantly, John says, sellers need to remove emotion from the sales process. Just because they’ve had many fond memories in their home doesn’t mean it’s worth more than its market value.
“You may have lived there for 10 years and raised three kids there, but those things have no bearing on the home’s worth,” he says.
7. Craft a meticulous budget and stick to it
There’s more to residence budgeting than your mortgage payment. Consider a variety of potential expenses before you decide that a home fits your budget.
Is there a condo or homeowners association fee, for instance? What might your annual repair and upkeep costs come to? Can you afford the property taxes? And don’t forget about the lawn guy or plowing services.
Forgetting to factor in just one of these considerations can throw off your budget and imperil your finances.
“You don’t want to wind up in a home and find out you’re overextended financially,” John says. “There’s nothing that puts more stress on your marriage or your family life than when all of your money is going into the home.”
If you can’t make the home and all of its expenses fit within your budget, let it go, even if you think the space is ideal for your needs.