Trading Places


By Diane Saatchi

A few months ago I wrote about trading down. Now the flip side ---trading up. Going larger or smaller: some things are the same. If you plan to stay in the same locale, you will be a buyer and a seller in the same market and can expect that if you are selling at the top of the market, chances are you will be buying there, too. The goal of selling high and buying low is rarely realized in the same market. And as mentioned in that blog (What to expect when you are ready to trade down), you will have two sets of closing costs which will add up to approximately 5% of the total of the two transactions.

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All things equal, it is emotionally easier to trade up than it is to trade down. The burden of greater expenses can be scary but once the decision to trade up is made, the added costs are usually expected and are thus baked into the budget. Even so, there may be some bumps along the way. 

It can be surreal to be a seller and a buyer at the same time. 

Obviously buying and selling means double anxiety, twice the decisions and loads of time both arranging for showings of your existing house and appointments to look at the purchase options. But, beyond the effort, time and anxiety, you’ll need to balance dueling goals of achieving the highest possible price on the sale with paying as little as possible on the purchase. The argument you use while negotiating on the sale of your house will be at odds with that which you use while negotiating on the purchase.  

Which comes first, the sale or the purchase?

If you can afford (financially and emotionally) to own two properties at the same time, look for the new, larger and more luxurious home before selling your current home. If the equity from your current home figures in to the purchase of the next one, sell first. Ideally, simultaneous closings are preferred. How lovely it would be to at the closing table while the moving truck is going from the old to the new house! Chances are, because this is the Hamptons, and you probably won’t be trading one primary home for another, the time lag between buying and selling will not leave you homeless. 

Either way, if you have pretty good self-control. It’s a wise idea to look at your purchase options before listing your current home for sale. I added “good self control” because if you fall in love with that must-have-property before you have given thought to selling, you undoubtedly will be an impulsive seller, too. This may not need to be restated, but just in case .... a buyer in love and a desperate seller are the greater fools everyone hopes to have at the other side of a transaction.  

Even larger, more expensive homes in the very best locations can be disappointments.

The gap between expectation and reality exists at all prices. I see it time and again, whether one's budget is $1M or $100M. Our wishes and fantasies about what is behind the tall hedges are often more exciting than the reality. And, what about those wonderful photos posted by real estate agencies? They show the house and property at their very best. In real time, the house is like a super model without the benefit of make-up and Photoshop, beautiful sure, but not magazine cover material. 

The higher the price, the greater the expectation. 

Compromise is often a tough pill to swallow, but especially difficult when spending what seems like an outrageous sum. This could be why so many very expensive transactions turn out to be major renovations or teardowns. If you are trading up to your dream house, if you have the time and resources to achieve exactly what you want, you may as well go for it. Or, could be if the trade does not realize your dream; maybe it makes sense to re-work your existing home? 

Trading Places, up or down, may not be just about shelter.  

It’s not enough to engage a real estate agent and attorney, an engineer, contractor and architect. It may be wise financial planning to trade up (or down) and as such you may want to include your financial advisor in the decision. It could be a big mistake to stay put especially if you plan to over-improve your home or it could be a mistake to go too long in real estate.

© 2017 Diane Saatchi