by Maurie Backman | April 6, 2021
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Selling a home today may seem easy, but here are some issues you may have to overcome.
In today's housing market, sellers clearly have the upper hand. Low mortgage rates and limited housing inventory have driven home prices up, and as a seller, it means you have a prime opportunity to walk away with a handsome profit on your home. But that doesn't mean the process of selling will be smooth from start to finish. In fact, you may have to deal with the following challenges if you're selling in today's market.
Once you sell your current home, you'll need to live somewhere. Unless you're planning to downsize, you may find that most of the comparable or larger homes on the market are financially out of your reach, or at least a stretch. If you have a lot of equity in your home (meaning, you own a large portion of it outright) and it sells for a high enough price, that'll help mitigate this issue, as you'll have more leeway in your new home-buying budget. But otherwise, you could run into a problem if home prices in your target neighborhood are so inflated you can't swing them.
The solution? Do your research before listing your home. The last thing you want to do is enter into a contract with a buyer only to have to back out because you can't find a new place to live.
Even if you make money on the sale of your home, there's a good chance you'll still need a mortgage to finance a new one. But mortgage lenders have gotten stricter with borrowers in the course of the pandemic, and you may find that it's harder to qualify for a home loan now than it was back when you applied for your original mortgage.
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To avoid problems, work on boosting your credit score quickly. You can do so by paying all incoming bills on time and paying off existing credit card debt. You can also check your credit reports for errors and get them fixed. Lowering your debt-to-income ratio will also make you a more attractive home loan candidate, so if you're able to pay off some existing debt, do it.
Home buyers today are consistently having to outbid one another due to the limited number of homes on the market. As a seller, a bidding war could really drive up the price of your home. But what happens if a buyer comes in with a strong offer to begin with? Should you accept it right away, thereby cutting off the opportunity for a bidding war -- or entertain other offers and run the risk of potentially getting less money for your home?
While a bidding war could work out in your favor as a seller, it could also backfire, so if you get a solid offer for your home, you may want to take it. Imagine you've listed your home for $400,000 and a buyer comes in and offers you $415,000. If you don't take that offer right away, that buyer and another buyer may go back and forth so that eventually, you wind up with an offer of $435,000 on your hands. But what could also happen is your home price gets driven up so high that both buyers walk away, leaving you with no offer at all.
As such, you'll need to weigh your appetite for taking on that risk. You can also talk to a real estate agent about how well bidding wars have worked out recently in your neighborhood. If an agent tells you that most bidding wars have ultimately resulted in a buyer paying a higher price, then it could be worth taking that chance. But if results have been mixed, you may want to plan to accept the first great offer you receive.
While it's definitely a seller's market, you could still face some hiccups in the course of unloading your home. Be prepared for these specific challenges to avoid getting thrown off guard.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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