Considering selling two homes for one

by Deniece Watkins Smith - Realtor, ePro, SRES 
March 8, 2011

Client:
     Unfortunately, when our friend the Realtor came to check out both houses (in Arizona) about a month ago, his suggestion was that we wait another year before we try to sell. He said that at this point we'd be lucky to get what we paid (Not what I wanted to hear, of course.)... In the mean time, I'm trying to be patient and work on the landscaping to improve both the "curb appeal" and, hopefully, the value. I'm taking a Master Gardener class. Something I've always wanted to do.

Deniece:
     Lots of people are wanting to recuperate what they paid for a house and it's very hard after the downfall of the market. So they are hanging on to a smaller house instead of doing their move up now. I think now is a perfect time to move up. 1) Taking a loss on $200K to get the same gain on $300K is a net gain [I'm adjusting prices here fr your area so forgive me], and 2) Interest rates are at the lowest on record ever. So if you pay more in the future in interest, for a bigger home, you lose twice, with price, and with interest rate. Are you more consolidating, or trying to move up?

Client:
     That's a good point. I'm not sure what you'd call it (what we're trying to do) - We each own a smaller home (around 1200 sq. ft.), and are hoping to sell both to buy one larger home, where we can consolidate all of us, our pets, and my business. Do you think improving the landscaping is a good idea? I also plan to do a small renovation to my house to add a 1/2 bath - as Bill (our friend, the Realtor) said that would be a good move..I appreciate your time to comment on this.

Deniece:
     Everything is a matter of the price of sanity in real estate. If you're having to manage two homes and would feel more comfortable in one sooner than later, getting that larger one now would be a good consideration so your payments over the next 30 years are based on record low interest rates. 
Here's an example:
   A $300,000 loan at 4.75% is a payment of $1,564.94
   A $300,000 loan at 6.25% is a payment of $1,847.15
I'm calculating those on principal and interest only, using a website here.  So if you sell your homes now to save that difference in payment, does it seem more beneficial to sell now or later?

     Regarding landscaping, only the front landscaping makes any big deal here.  You try to create a positive first impression with any home.  "Wow, look how fantastic that home is, let's go in," the Buyers say.  Then they get in and smell fresh paint, see fresh carpet or refinished floors and say, "Let's keep looking around, this place seems wonderful."  If you can't get them in the door, all stops.

    Do one house at a time.  Choose the home you use least.  Try the market and how it feels selling one home.  You'll learn a lot about the whole experience that you can transfer to how you choose to prepare and present the second home.

    Call a lender.  A lender will be able to tell you now what you can do with your current financial situation.  They will also be able to tell you what you can do when one home sells, and when the second home sells.  They can use worst case scenarios so you're happily surprised when all comes to fruition.
     You call the lender and say, "We are thinking of selling one or two of our current smaller homes to buy a larger home.  Here's what we have in the bank.  Here's what we make.  Here's what our credit score is.  What are our options now?  What would our options be if we sold one home for $XYZ? (Then give a low estimation of the sale price.)  And lastly, what would our options be if we sold both homes for a total of $XYZa?

     Don't use a Lender/Realtor.  Anyone who thinks they can stay up with the real estate market and the lending market is greedy.  It's like being an expert at commodities and high tech on the stock market.  Too much information!  Use an expert who focuses on lending, and try to get the VP or Broker/Owner of the lending firm.  They tend to know what is happening now and what is forecast in the near future. 
     Use a Realtor who specializes in your area specifically.  If the homes are 30 miles apart, you may want two localized experts.  You can have your friend refer you to Realtors of your choice and he'll get a 25% referral fee paid to him, and you'll get the expertise you need in a very difficult market.  Some people think that an agent won't work as hard for them if that agent has to pay a referral fee to someone else. However, since we spend 90% of our time and money getting leads, it's quite the opposite when we receive a referral. We're overjoyed to help out someone and pay that fee.