Repeat homebuyers have a leg up on first-time homebuyers: They have longer credit histories, stronger understanding of real estate and more buying power, typically.
But that doesn’t mean the next home purchase will be a cakewalk.
Fifty-four percent of existing home sales in June came from repeat homebuyers, up from 49 percent tallied a year earlier, per the National Association of Realtors. By contrast, purchases from first-time buyers, who typically represent 40 percent of the market share, decreased to 29 percent in June.
Current homeowners have seen their home prices increasing over the last several months, which means they are more willing to sell their existing properties and upgrade to bigger, better homes, says Christopher Tower, assurance partner in the real estate practice of BDO USA in Costa Mesa, Calif.
Additionally, “people who have been on the sidelines for the past few years are coming off them as they see interest rates creeping up,” says Gregg Goldsholl, sales associate with Houlihan Lawrence in Larchmont, N.Y. “This rise in rates is hurting first-time buyers who have less buying power than last year.”
Repeat buyers, unlike first-timers, are better positioned to meet the stricter lending requirements imposed by banks nowadays. Besides having longer credit histories and better credit ratings, they have higher incomes than those who have never owned before.
“For me, it’s been easier every time I purchase again,” says Chicagoan Mark Mason, who recently bought his eleventh house. “I know what to ask for, what to look for and how to speak to agents or owners to get a deal done.”
Still, repeat buyers shouldn’t be lulled into a false sense of ease when looking for a new home. To ensure a smoother transaction without regrets, experts recommend the following advice:
• Scrutinize your finances. “Meet with a financial adviser to gain a complete understanding of the amount of monthly cash flow you have available to pay the mortgage, property taxes, et cetera,” Tower says.
• Arrange for financing early. Get pre-approved or qualified for an appropriate loan to know what you can afford, and shop around for a mortgage from several different lenders. Compare the cost of fees listed on the good faith estimates you collect.
• Enlist a professional you can trust. “Find the right [agent] who will listen to your needs and work for you, not just for the commission,” Moore says.
• Delay buying home B until you’ve sold home A. “Have your house appraised before you begin your search so you know its value, and list your house and be under contract before you bid on another,” Goldsholl says. “Also, price your house to meet your needs. If you are hot to move quickly, you’ll need to lower your price.”
• Choose a next home that fits your needs and budget. “Don’t buy the largest and most upgraded home in the local market. You may be overpaying and subject to greater price decreases in a down market than other homes in the same market,” Tower adds. “Consider how hard it will be to sell this home in the future.”
Furthermore, consider the tax ramifications involved with the move, the fees and commissions related to selling your resale home, the impact of the transaction on your cash flow, and the ability to save for retirement.
“Also, remember to always make financial decisions with your head, not your heart,” says Gail Cunningham, a homeowner in Wichita Falls, Texas, who has bought and sold seven primary residences over four decades.
“Unless you’re an investor, buy the house because it’s where you want to live,” Cunningham adds. “Don’t assume you’re going to make money when you sell. Too many people have learned that lesson the hard way.”