You’re heading to a new home, but you have a few options for the old one.
When you move, it’s standard practice to sell your old home. Unless you’re the President. While the Obamas have made their new home in the White House in the nation’s capital, they still are keeping their home in the Kenwood neighborhood of Chicago’s South Side.
The rest of America, however, almost always needs to sell their first home in order to move to their new house; keeping it isn’t an option.
But with the current state of the economy and home sales not yet rebounding, many wonder what to do when they must move.
The good news is that if you face this situation, you have options: sell, rent or find a house sitter. Before you decide, consider all the pros and cons.
The biggest advantage – if you’re fortunate to find a buyer – is that you eliminate all expenses associated with the home: mortgage, taxes, insurance, bills, and so on. In addition, you gain back equity. “There are still transactions taking place. Most people are relieved to get out, and in many cases they’ll buy a new home for less than they would have a year ago,” says Jennifer Ames, a saleswoman with Coldwell Banker Residential Brokerage in Chicago.
The biggest negative is that in today’s market most sellers are getting less than they had hoped for, Ames says. Yet, if you can hold on to the property for a year or so, however, you may be able to get your listing price, says Bill Golden, a salesman with RE/MAX Metro Atlanta Countryside in Atlanta. “In the past, I would have recommended selling rather than renting, especially if you were going to live in another city. However, the current market being what it is, I would seriously think about keeping the house, at least until the market improves,” he says.
When you don’t want to give up your house yet – possibly you’ll return to the area or you want to wait out the housing downturn to get that higher price – you may be able to find a tenant to pay a healthy monthly rent. Many real-estate companies, independent companies and even online services can be good sources of referrals. Be sure to check your renter’s credit worthiness and stability to be sure they’ll be able to pay the monthly rent and utility bills – plus put down a security deposit. A contract spelling out do’s and don’ts is important, says Golden. He also recommends having an attorney look over a renter’s contract to be sure it covers all necessities. Be sure you check the fine print of your homeowner’s insurance and mortgage policies, too, to be certain they don’t prohibit renting. Besides recouping some expenses, another advantage of renting is that it’s good for a house to be lived in to keep systems running smoothly and discourage would-be burglars. Before you move, photograph your home and its contents to have proof of its condition in case problems arise, says Ames.
In most cases, you won’t be able to cover all your expenses, says Lawrence Roberts, author of “The Great Housing Bubble” (Monterey Cypress Publishing, 2008). Part of the reason is that many other homeowners who haven’t been able to sell already have had this idea. “There are more rentals coming on because more than a few people are having trouble selling,” says Ames. David Adamo, CEO and founder of Luxury Mortgage Corp. in Stamford, Ct., agrees, adding another wrinkle: “Many developers who can’t sell are pricing units to rent (them) and putting more pressure on rental prices,” he says.
Besides stiffer competition, you may incur new costs, too. To find that renter and check on your home in your absence, you may need to hire a professional leasing agent and/or property manager if you’re moving away, which takes a big bite of your earnings, says Christine Karpinski, director of HomeAway Inc. and author of “How to Rent Vacation Properties by Owner”(Kinney Pollack Press, 2007).
The percentage often depends on the type of rental, Karpinski says. The three most popular are a long-term rental of a year or more for which you usually move your possessions with you, a corporate-style rental – usually shorter – and for which you usually leave most furnishings, or a vacation-style rental – even shorter and sometimes only for a week – for which you leave everything behind, she says. What costs renters assume often depend on the type of rental, she says. And even after you rent, you may have to spend some money to fix up the home after normal wear and tear, even if your renters have been careful.
If you have a nice home or condo in a good location, you can often find someone eager to watch your home, particularly in this economy. You may be able to trade the free rental for some work such as tidying up a yard or checking on the HVAC system.
Nobody is likely to care for your house as well as you do, and when someone’s not paying rent, they’re unlikely to be as careful with your possessions. Golden recommends investing in a service contract so a professional cares for the HVAC system, roof, swimming pool, even appliances. You want your house in the best possible shape when you return, he says.
© CTW Features