Reasons to Check Your Finances Before Selling

There are important financial steps that you should take before selling your home to ensure your goal is accomplished without significant surprises or glitches. 

 

When a homeowner decides to sell, I've found that their primary concentration is most often on property preparation.  The homeowner picks an agent and then has them come out to tell them what to do to make the property irresistible to buyers.  They then go to work and put a lot of time and energy into making their home attractive so that it will sell quickly.

 

More importantly, though, is taking the time to be financially prepared.  This important step will help you to avoid most unnecessary disappointments.  The most common reason for a homeowner's decision to sell is to improve their lifestyle.  The first step in getting ready to do that should be to get fit financially.  These steps are important whether you are moving up or downsizing.

 

* Check your credit report - Be sure to check all 3 credit reporting agencies.  Equifax, Transunion and Experian.  What shows on one report, often does not show on another.  This is what professional lenders do when granting a loan.  There are so many reasons to do this and in doing so, you can save yourself a lot of time and money.  Don't be so sure that your credit is "fine" because you always pay on time. Inaccuracies are found frequently and can take months, even up to a year, to correct.  The sooner you start the better.  If you are planning to make a purchase upon completion of your sale, don't wait until you have the buyer to discover there is a problem that could have or should have been dealt with before putting your home on the market.

 

* Make a Spreadsheet - I recommend that you make a spreadsheet so that you can clearly see your desired financial outcome after selling.  This should be done whether you are looking to decrease your monthly output or to increase in order to accommodate your new lifestyle.  When rates are low and home prices are rising, it's easy to get excited about moving up without thoroughly examining how this will play out financially down the road and after the "honeymoon period" is over.

 

Remember to factor in what the actual increase in your mortgage payment will be.  Be clear on how much you’ll net on your home, how much cash you’ll need to close on your next one, and how much your utilities, property taxes, insurance and other home-related expenses might increase if you move up.

 

If you are downsizing from a home you’ve live in for decades to a brand new, but smaller, condo – you could actually see an increase in property taxes in some areas and get an HOA bill you never had before.  However, the increased bills might be offset by decreased heating, cooling and maintenance, and the fact is that the smaller, new place might just be the right size and style for the next stage of your life.

 

Discuss these things with your agent who can help you understand what sort of downsize or move up property you can get at various price points. Talk to your mortgage broker to discuss different financial scenarios for your next purchase and also speak to your tax advisor to discuss any tax ramifications.  Consult your financial planner so that you have proper perspective on how this move affects your other future plans.

 

* Get inspections and key reports in advance - The potential for financial surprises is real any real estate transaction. Work with your agent to get a termite report, possibly a home inspection report, HOA disclosures if applicable and a preliminary title report.

 

* Create a financial plan for your home sale. Ask your agent to prepare an estimated seller net sheet for you.  Do not depend on the escrow company to disclose all of your costs.  Escrow companies are a neutral processing entity and they are not there to give you advice.  A good agent should be able to provide a personalized net sheet for you which allows for any specific concerns that you have, in addition to the usual sales costs.

 

* Document your financial plan and budget for selling your home -  Many agents will sit right down with you and help you do this; if yours will, take them up on the offer. It also creates a perfect time and space to get educated about 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.

 

Nancy Puder is a real estate broker with Nancy Puder & Associates in Arroyo Grande, CA.  If you have any questions or concerns regarding your property, you may contact Nancy to arrange a free consultation at (805)710-2415 or Nancy@NancyPuder.com.  Go to Facebook.com/NancyPuderRealtor and "like" her page to access other real estate related articles.