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Selling/Looking for New Home

Good afternoon,
I have been living in my current house for around 8 years.  I bought it to help someone out, mortgage fully in my name.  Got married about 5 years ago.  We both have decided that we need to move.  We are wanting to start a family and the whole area has turned into rental properties and is attracting much younger and less responsible crowds.  As such, we are at the break even/upside down area with the home value (I assume).

We aren't sure of what our next steps should be.  Currently our thought process is to do the following:

Add a shower in a full bath that doesn't have one
Redo the cabinets and countertops in the kitchen
Fix some issues in the guest bath
Remove a tree from the property due to disease
Replace Gutters
Get an appraisal
Find a realtor that works in our area and can cover where we want to move (30-45 minutes south of where we are)

We have good credit (750+), but we're concerned that if the house is upside down, which is possible at this point, that it will be too much to buy a new home.  We do own a rental (still paying on it), and have discussed the possibility of turning this house into one, but I'm unsure of how that would work and if we would need to refinance our current home to show that it's a rental before we could change our residence.

I am considering to talk to a financial planner or a similar professional in the coming weeks, but would like to get some advice before I speak to them.
  • June 16 2012 - US
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Answers (6)

Get several opinions
Get a few Comparative Market Analysis opinions

I am always amazed how they can differ when you deal with experts

If you decide to do home improvements.
I would talk to several contractors to find out the cost of different upgrades

The CMA is a great tool however the last thing you want is to have the work done and find the market slows and your home is worth even less.

Often I will clean and remove any extra items that cause clutter. 
After that painting is usually enough.
Remember someone buying your home may want it to be customized to there likes.
They just need to see the potential. 
That is where painting, cleaning and staging come in.
  • July 20 2012
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Since you are already a landlord, a lender will look much more favorably on your ability to rent out the current home. They may be concerned that you're an investor attempting to accumulate property by claiming that you intend to occupy when you don't... but if you've owned this home for 5 years and are moving 30 minutes away, that should be easily resolved.

As far as talking to a financial planner; remember that they are sales people with a tiny bit of education in  insurance annuities, retirement, etc. Very few of them know anything about real estate. I almost jumped through my TV to choke the life out of Suze Orman when she was on CNN a few weeks ago saying the dumbest stuff I've ever heard about renting vs buying.

You have a real estate question. Consult a real estate professional. When you find the right one, let them refer you to the right lender. That lender will be able to advise you on your options for financing. DO NOT piecemeal this process. You could easily do the wrong thing [like refi your current home] that would completely derail your train. Figure out all the options and potential outcomes before you make any decision. 

Good luck!
  • July 20 2012
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Thanks!  We still haven't decided what we want to do yet, but I do appreciate the input.
  • July 20 2012
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Your best bet would be to talk to a few lenders and see what they can come up with as options for you and your specific financial situation.  Basically, see if you can get pre-approved to buy a new home even though you have these two other properties.  Then turn your current home into a rental and hire a property manager.  There are a lot more renters out there due to the housing crash, and with proper screening, you (or your property management company) can find a good tenant.  Then once your home has equity, you can sell it if you want.
  • June 19 2012
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We don't intend to short sale.  I feel we have two options, the first being try to sell and buy, the second being turning this into a rental and buying.  

We already have one rental (in spouse's name) that we still owe on, and this would be a second (in my name), if we went this route.  We would be financially able to handle both rentals and the new home, but would prefer not to.  Not because of financial reasons, but because renting property is extremely time consuming.

You recommend that I speak with the financial advisor of the bank, would there be any benefit to speak with an advisor that is not employed at the bank, or does the advisor being employed with the bank give me better options?

Thanks so much for the assistance!  Navigating through this is quite a tedious process.
  • June 16 2012
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If you have money to come to the settlement table and pay off the mortgage, whatever is left due, you won't have too much to worry about. If you don't, the mortgage holder typically won't consider a short sale unless you have a hardship. Wanting to start a family and need more room is not considered a hardship in their mind.

You don't need to refinance your current home to turn it into a rental or investment property, but do you have enough to buy a new home without selling it? Are you financially secure enough to pay 2 mortgages? If you choose to go this route, talk to a lender to see if they would give you a mortgage on a second property that you will be making your primary residence. A lender won't consider the rent as income until you've had it rented for awhile.

There's a lot to consider in your situation. Many banks have financial planners and give mortgages. It might be worthwhile to contact your current bank if they have both and sit down with them and lay all your cards on the table.

I wish you the best of luck in whatever you're able to do.
  • June 16 2012
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