Homes: Sell at a loss, buy at a discount

Jennifer Galdes wants to buy a home in a better neighborhood, but is now the right time?

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By Beth Braverman, Money Magazine staff reporter

Jennifer Galdes, Chicago
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(Money Magazine) -- The month Jennifer Galdes moved into her condo in the Albany Park section of Chicago, the local paper suggested that the area was up and coming. Six years later, she's still waiting for a Whole Foods.

Galdes, a self-employed publicist, longs to trade up to a similar-size (2,000-square-foot) apartment in a tonier neighborhood. With area condo prices down 16% since their peak, according to S&P/Case-Shiller, she sees her chance.

The catch: She'll have to unload her current place first.

So is now really the right time to make this move, she wonders? Wheaton, Ill., financial planner Kristopher Johnson says yes.

Galdes, 43, may have to sell her condo -- bought in 2003 for $287,000 -- for less than she'd hoped. But the discount on a better place will more than offset the reduction on hers. And she'll net $86,000 after closing even if she breaks even.

Still, she's got to be strategic in selling and buying.

The solution

1. Nail down a value. Galdes should talk to agents to get an idea of what her place might sell for. If that price is acceptable to her, she should list it ASAP, as she may need six months to sell, says local realtor David Hanna. (And she should sell before buying, Johnson adds.)

2. Set a budget. Because Galdes is debt-averse, Johnson wants her to keep her mortgage the same ($175,000). He says she can use up to $100,000 from nonretirement savings toward a down payment. If she nets $86,000 on her condo, she can afford to spend about $360,000.

3. Shop like a shark. Area condos are selling 5% to 10% below list price, says Hanna. So Galdes can shop that much above her budget.

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