There are a number of financial prep steps that need to happen to ensure your home’s sale improves your life the way you hope it will. Here are four of those money-do’s to add into your list of home sale prep steps:
Get Clear on your Credit Status. I know, checking credit is an item on a home buyer’s prep list. But if you’re selling a home, chances are good that you’ll want to buy a replacement one. The best time to spot credit glitches and hitches is not when your current home has been sold and you are waiting to close. If you’re thinking you want to sell your home this year, now is the time to check your credit, spot issues and begin fixing them.
Budget Housing Costs. Often times we ballpark these things: rates are still good, you just got a raise, you can well afford your current payment, looks like your home is worth more now and those houses up the hill don’t cost that much more – time to move up, right
Maybe so. But maybe no. There’s a lot more to account for in this equation. You need to factor in:
i. what the actual increase in your mortgage payment will be.
ii. how much you’ll net on your home
iii. how much cash you’ll need to close on your next one
iv. how much your utilities, property taxes, insurance and other home-related expenses might increase if you move up.
Same with downsizing: if you downsize from a home you’ve lived in for decades to a brand new, but smaller, condo – you could actually see an increase in property taxes in some areas and get a maintenance fee bill you never had before. That doesn’t mean it’s not the right move to make: the increased bills might be offset by decreased heating, cooling and repair costs. The smaller, new place might just be the right size and style for the next stage of your life.
Call on your real estate agent, mortgage broker, accountant and financial planner to provide advice and counsel.
Get a Home Inspection. The potential for big, bad financial surprises is the scariest element of any real estate transaction. And when you’re selling your home, that potential comes in the form of surprise property problems that complicate your sale. One way to limit your financial exposure to these sorts of surprises is to simply decide not to wait to gather this information until a conditional offer. In the GTA markets, it is now standard operating procedure for sellers to actually have a pre-sale home inspection. This empowers you, the seller, to either begin conducting repairs or to fully disclose what needs doing and list your home in as-is condition.
Create a Financial Plan for your home’s sale so you understand all costs ahead of the listing.
When you bought your home, the seller paid both agents’ commissions. Now that you’re selling, it’s your turn. Calculate the average 5% of the purchase price that you’ll need to cover your listing agent’s work, and the buyer’s agent’s, too. And don’t forget HST. You need to pay 13% of the total commission as well.
Depending on the condition of your home, you may need to spend anywhere from a few hundred dollars to more than a few thousand getting it market-ready, whether you decide to do a DIY-fix-it sweep or to hire the best stager in town.
Depending on how much financial margin you have – or need – and on what your home inspection revealed, you might want to build in a line item for a repair credit to offset the cost of any repairs that come up during the buyers inspection (Just because you did one, doesn’t mean they won’t conduct their own. In fact, count on it).
Your final money-do is to actually document your financial plan and budget for selling your home. I will sit right down with you and help you do this. I will also detail the flow of the home selling process and standard bargaining practices in your area. The goal is to get a clear, concrete understanding of the dollars that will flow in and out during this major life change, so you can make clear, calm decisions throughout the process that set you up for success long after closing.