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Tips for frequent movers

Although many people believe they'll remain in one house for years, the reality is that most won't. American adults average a move every five years, according to federal housing data. Today's uncertain economy means that many workers may find themselves moving to keep their current job or get a new one.

Whether you see yourself as a serial relocator or not, these days more and more people qualify. By discarding that 30-year mortgage mentality and adopting a hard-headed, practical approach to moving and homeownership, you're less likely to lose your shirt when it's time to pull up stakes and move again.

The sheer number and variety of mortgage options means that you stand a better chance of finding a mortgage that meets your needs even if you stay in a home for a short time. If you're on a short-term assignment, think hard about whether you should buy at all. Renting may be your best bet.

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If you decide to buy, your choice of a home can enhance or doom a quick resale should you have to unload it in a hurry. Experts advise playing into regional tastes in terms of a home's layout and choosing a house in an established neighborhood. These two factors make a house easier to sell.

Buying vs. renting
The advantages of buying vs. renting, especially in a relatively low interest rate environment, are well known. But some of these advantages -- particularly when it comes to building up equity and avoiding fees -- rapidly disappear if you're only going to be in a particular location for a year or two.

"If you're going to be living somewhere a year or two, it makes sense to rent," says Betty Crandall, president of Christie's Real Estate, Great Lakes Region in Erie, Pa. "Or, if you plan to be somewhere longer and have bad credit, rent while you save for a house and work to fix your credit problems."

It's hard to build up much equity when you own a home for just a few years. Plus, if you can't sell, you could end up continuing to own the home after you move and even taking a big loss when you do eventually sell. Even if you build up some equity, the fees involved in buying and selling a home in rapid succession can quickly eat up any profits.

Donald Fletcher, M.D., an ophthalmologist at the University of Alabama at Birmingham Center for Low Vision Rehabilitation, has moved frequently during the course of his medical career. "Usually by the time I'm ready to move I have just about enough equity built up to pay for the front doorknob," he says.

This is his second stint in Birmingham. He lived there for two years in the early 1990s, and had a hard time selling his house, which was on the market for more than a year. "Then you find yourself making payments on two houses and that's a tough situation," he says.

Which mortgage?
Despite the fact that interest rates may rise in the coming months and years, adjustable rate mortgages (ARMs) still make sense for serial relocators. Vijay Lala, senior vice president of Countrywide Homeloan, a unit of Countrywide Financial, recommends one-year or hybrid ARMs that are interest-only, which gives homebuyers the maximum amount of flexibility.

"For someone who will be in a house for no more than three years, an ARM using a LIBOR index means a very low payment," he says.

LIBOR stands for London Interbank Offered Rate, a spot rate that can change quickly. For someone who is going to be in a house for three to five years or longer, a three- or five-year hybrid ARM with an interest-only term provides a low rate plus some cushion against rising interest rates.

"A three or five-year ARM gives you the chance to outlast the mortgage cycle, which lasts about three to five years," Lala says. "We see dips in rates during this time period and that gives buyers a chance to refinance to a lower rate."

Hybrid-ARMs leave the first years of a mortgage at an initial fixed rate, which then adjusts upward or downward depending on the benchmark interest rate and any margin. While interest-only terms allow buyers to qualify for a mortgage more easily, if you opt not to make any equity payments, you won't build up equity and may have nothing to show for your foray into homeownership if you sell your house without a profit.

Longer-term fixed mortgages offer buyers more security, but aren't always the best deal for frequent movers. Brendan Nordgren, a teacher in Athens, Ga., discovered that longer-term mortgages carry a sting for serial relocators.

"We've had 15-year mortgages a couple of times that have left us being cash poor and with not a lot of equity when we moved because we hadn't stayed in the house that long," she says.

Newcomers to an area don't know much about a city and its neighborhoods, which can lead to buying in the wrong area. Nordgren suggests renting for up to six months while getting a feel for your new area. "If you don't have time to research before you move, rent a townhouse or a house and put your stuff in storage," she says. "Take your time to look around for a house and at the different neighborhoods."

Crandall recommends hiring a real estate agent who knows which areas are the most desirable where houses sell quickly. "Look at established neighborhoods where people want to live," she says. "When you may move fairly soon, it's location, location, location because you want a house that is sellable."

Different buyers prefer different neighborhoods and different amenities, she notes, so it's important to find a savvy real estate agent who will meet your needs. "Younger people like to be closer to the city and to their jobs. Couples with kids want the best school districts," she says.

Fletcher, the ophthalmologist, says experience taught him that moving into an older, established neighborhood is better for resale than a newer neighborhood where builders are developing new subdivisions. "It's hard to compete with new homes when you're selling," he says. "Why would someone want to buy a house with my taste in layout and decorating when they can go to a builder and get exactly what they want in terms of layout and carpet and painting?"

In terms of any decorating, painting or remodeling, it's best to choose neutral colors that will appeal to a wide range of buyers. Serial relocators who want to sell quickly can't afford to go wild indulging their own tastes as they may alienate potential buyers.

Type of home
Crandall recommends purchasing a home no older than 10 years, but stresses that the location of a home is more important than its age. "If you buy a home that isn't older than 10 years, there won't be a need for big repairs such as putting on a new roof," she says.

Fletcher notes that there is "tremendous variety in terms of regional tastes" and that it's better to buy a home like others in the area than to look for something that fits your own tastes. "The first time we lived in Birmingham we had moved from California and we looked for a house with a California-like floor plan with lots of open spaces," he says. "But that home was hard to sell because nobody here likes the open floor plan, they like the boxy houses with lots of rooms."

Nordgren, the teacher, agrees, noting that the homes that were the toughest to sell were those that had strong emotional appeal. "In Missouri, we made an emotional decision to buy a very special house high on a bluff over the river," she says. "We didn't make any money off of it, but I don't regret the decision because it was a beautiful house and we wouldn't have had the opportunity to live in a house like that anywhere else."

-- Posted: July 7, 2004

Guide to Moving
30 yr fixed mtg 3.98%
15 yr fixed mtg 3.03%
5/1 jumbo ARM 3.85%
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