Philadelphia Real Estate & Philadelphia Homes for sale at Philly Living

A common question that we get is some form of this: “I own my home but am interested in selling it and using the equity to upgrade to a larger home.  Should I pick out my new home first and then list my home, or should I list and then pick out the new one?”

The answer, of course, is that it depends on many factors.  However, most people who are asking this are doing so because they do not have the means to purchase a new home (down payment + closing costs) and to potentially carry both homes for very long.  Therefore, you should consider the following:

1. How much money do you have?  If you are trying to buy before you sell (or have an agreement on your current house), you can’t guess what your house is going to sell for and consider those proceeds as money that you can spend.  What if it doesn’t sell as quickly or for as much as you hope it will?  Can you still follow through on your new home purchase?
2. Homes take longer to sell these days.  If you pick out your new home, when will yours go under agreement?  Next week?  In three months?  A year from now?  Can you afford to carry both homes for an unspecified period of time?

At the end of the day, when you remove emotion from the equation, buying a home is a financial transaction and really is no different from buying your groceries.  When you go to check out, you only get your food if you (a) have enough cash to pay for it or (b) can borrow the money on your credit card.  Since most people are borrowing money to purchase real estate, it is imperative that you sit down with your agent to discuss the pros and cons of every approach.

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All too often we receive bids on properties that include little more information than the price that the buyer is willing to pay and a day that they would like to settle.  This is not a huge problem if, as a buyer, you are paying cash and not interested in having any inspections done.  In most cases, however, this is not the case.

As a listing agent, our fiduciary duty to the seller is get their house sold at the highest possible price.  So, what matters other than price?  Simply put, not all buyers are serious and not all buyers can realistically make it to settlement.

So how can you differentiate yourself from these buyers to let the seller know that you are serious:

1. Put all offers in writing such that, if accepted, the seller need only sign to execute the contract.
2. Provide ample financial information.  Pre-approvals are a must.  In addition to that, don’t hesitate to list salary information, real estate owned, credit card bills, etc.  If you work with a Realtor®, they can provide you with a Buyer Financial Information worksheet.
3. Be specific about your loans.  If you are doing an 80/15/5 piggyback from Chase, state that.  From the seller’s perspective, a buyer who doesn’t know who they will finance the property is a high risk.
4. Earnest money shows, well, how earnest you are.  You should put at least 5% in escrow, preferably more.
5. Quick closings are always the preference.  The seller doesn’t care that your lease isn’t up for four more months.  They have the property on the market because they want to sell now.

Lastly, the advice I give all of my clients: decide how high you will go before you start negotiating!