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The cost of a trade-up

Posted by Rona Fischman January 14, 2010 02:09 PM

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When I meet with first-time buyers, I give them tools to help them predict whether they will succeed in the current market. First, they identify a monthly payment they can live with. Second, I make my trusty calculator come up with a mortgage amount. Third, we add in down payment funds to come up with a top purchase price. Fourth, we look at what has sold in the past three to six months to see if their purchase power has been enough to purchase in their size, location, and condition parameters.

Thatís the first time. When a homeowner is considering a trade-up, thereís more to consider.

First they need a reasonable prediction of how much equity will be gained or lost on the sale of their current home. I recommend getting a good Comparative Market Analysis (CMA) from two or so listing agents. Remember that I donít do the listing business, but I am a connoisseur of those who do it well. I can name names of agents who can give an estimate that is likely to stick.
(I know, some of you think we agents are all worthless, but I strongly disagree. Very few people who are not working in real estate can objectively predict what something will sell for.)

After they know the equity level that is likely to be added or subtracted from their buying power, they can determine whether their buying power will get them something that meets their size, location, and condition parameters.
Next, they must determine whether they have the credit, income and assets to hold mortgages on both properties at the same time, or whether they must close on the first property before buying the second. I discussed the vagaries of that yesterday. Today, I want to review some of the costs that may not be obvious:

1. You all know about the dreaded broker fee and so-called closing costs. Add to that the fee for inspections, and legal work.
2. Sellers add transfer taxes, capital gains taxes, Registry fees, cost of getting CO/smoke detector certification, costs of clean-up, and staging or otherwise preparing your place for sale.
3. Then thereís moving costs. If you are moving once, then one moving cost. If you are moving twice, then two. Plus storage of some stuff. Plus security deposits if you rent in between.
4. Also, donít minimize the cost of your time, effort, and inconvenience during the for-sale period and during the move(s).
5. The first time I wrote about this, Antigravity added repairs or credits after inspection to the list.
6. Also, that first time, John P. mentioned that there is interest being paid on the bigger mortgage you would take out. That is a cost that is added into your new mortgage payment.

Does anyone want to join Antigravity and John P in adding to the list?

For those who traded-up, what was the worst part? What was the most costly?

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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