Dave,
My husband and I are in a predicament—we have been thinking of moving for a few years. We've been poking around on Zillow to see what’s available and if anything sparks our interest. We weren't having any luck, but then we attended the Parade of Homes this fall. We fell in love with one of the homes on tour. The only problem is it was out of our price range. Our Realtor has shown us a few houses since then, but we can’t stop thinking about how perfect that home is for us! We need your help making a game plan. What would be better in our current market?
Option One: Stay in our current home, and strive to save a large enough down payment so we can afford to build that same house?
Option Two: Sell our home, use the equity to purchase a house in the next price range up, live in it a few years to build more equity, and then make the jump to build our dream home?
We need your help! Thank you in advance!
Laura and Adam, Grand Junction
Laura and Adam,
Oh my, you have what one of my friends calls the “want its” and once you get a case of the “want its” it is very hard to rid of it. The “want its” show up when you are most unsuspecting and innocently looking at something that you may or may not really need. While you are looking, something inside taps you on the shoulder and plants the seed of “I want that” and that is when the real trouble begins. We have all had this disease so there is no shame in acknowledging you have it, its what you do to get rid of it that separates the men from the boys! All kidding aside, you really do have a problem and it will take self-control and discipline to put it in the rearview mirror.
I can tell from your question you guys are not the type to make a rash decision as both of your options are very reasonable and show financial discipline and the development of a realistic plan for the future. There are a lot of things to consider, but option one sure sounds like it might be the best play especially when you consider that there are costs in both buying and selling that you can only incur once if you don’t do option two. Each time you sell it will cost you on average of 6-7% and each time you buy it will cost you 1-2% and this does not include any soft costs associated with both. Considering these costs, if you are selling $250,000 and purchasing $400,000 you will spend at least $25,000 to buy and sell. If you don’t buy and sell in between the “dream house” then you will automatically be that much closer to your goal. Clearly you will eventually have to sell this home and purchase the “dream home” but it illustrates that doing it twice will likely just add time to achieving the desired dream home!
I would also take into consideration that option one is the safer play against any economic upheaval that potentially exists during the next year or two while we grind through what is sure to be a messy presidential election cycle with plenty of potential clouds on the horizon. I personally believe our area will remain strong over the next several years, however choice two would serve as a bit of a hedge against any potential unforeseen downturns.
Option two might also be the right choice, especially if you are outgrowing your existing home, have had a shift in needs that your existing home does not fulfill or are just plain sick of where you live! I am always a proponent of your home being ones “happy place” and if you are just not happy where you currently live, then option two would certainly be a more appealing choice, as I have often said “it’s not always about the money.” My vote, on face value of your question, would be to strongly consider choice one and work hard to put the “want its” on the back burner and work hard to keep it at bay for as long as possible. I honestly believe you will make it work regardless of your choice, as both are very reasonable and the outcome of most every decision is determined by what you make of it! Good luck!
Dave Kimbrough
The Kimbrough Team
