Buying and Selling a Home at Once? Here’s How to Do It Right!
Scott has a excellent blog on this subject.
Timing and a little bit of luck play a crucial role when buying a new home while selling your old one. While some aspects of the process are beyond your control, there are steps you can take to increase the chances of a smooth closing, perhaps even on the same day! Here is some essential information to guide you through the process of buying and selling a house simultaneously.
Assess the Local Housing Market
The state of the real estate market in your area is a pivotal factor in timing your home purchase and sale correctly. Whether you're moving within the same town or across the country, understanding the market you're dealing with is vital. The time it takes to buy and sell a property can vary significantly based on local real estate conditions.
• In a buyers’ market, more homes are available than buyers. In this situation, finding your new home might be easier, but selling your old home might take longer. Sellers might be open to a contingent offer, meaning you buy their home contingent on selling yours first.
• In a sellers’ market, more buyers are present than available homes. Your current home is likely to sell quickly, making it more challenging to find a new home. You could consider asking your buyers for a rent-back agreement after closing to allow time to find your next place.
Select an Experienced Real Estate Agent
Navigating the process of buying and selling simultaneously can be complex and overwhelming. Having Scott and the Smolen Team by your side is immensely helpful. An experienced, local agent can help determine the market value of your home, guide you through timing, strategy, and negotiation.
• The agent can assist you in finding the perfect listing price for your home based on local market expertise and comparable sales.
• If buying and selling in the same market, consider using Scott for both transactions to streamline communication. If you are buying in another market area, talk to Scott and get a good referral from him for that area.
Understand Your Finances
After selecting an agent and getting a sense of your local market, it's time to delve into your financial situation. Consult with your mortgage lender and financial planner to assess your financial feasibility. Factors such as liquid cash, home equity, and qualifying loan products can influence your decision-making.
Determine Your Home's Resale Value
Researching your equity involves understanding your house's likely selling price in the current market. Consider conducting a pre-inspection to identify any necessary repairs or concessions you might need to make to potential buyers.
Know Your Home Equity
If you're selling a mortgaged property, find out how much equity you have. Equity refers to the amount left over after deducting the remaining mortgage balance from the current market value of your home. You should also consider whether you can afford to purchase a new home without using your home equity, as it won't be accessible until after the sale closes.
Buying a House before Selling:
Option 1: Make an offer with a sale contingency, which means you find your new home first and submit an offer that's contingent on selling your current home successfully. This approach works best in buyers’ markets.
Option 2: Request an extended closing if you're confident your current home will sell quickly. This gives you more time to sell and use your home equity to buy a new property, making it more viable in buyers markets.
Option 3: Purchase with savings if you can afford to pay the down payment from your savings. You can then sell your old home after completing the purchase. Make sure to account for closing costs, inspections, and moving expenses.
Option 4: Purchase with a home equity line of credit (HELOC) if you qualify. A HELOC allows you to borrow against your current home's equity for the down payment, to be repaid once your home sells.
Option 5: Use a bridge loan, a short-term loan offered by banks to cover the down payment until your home sale closes. Ensure you inquire about this option early, as not all banks offer it.
Option 6: Rent out your first home if you don't need the sale proceeds immediately. Becoming a landlord can have challenges, but it allows you to delay selling until you find the right home.
Pros of Buying before Selling:
• Immediate place to move to.
• Saves money on storage and temporary housing.
• Less pressure to rush into buying. Cons of Buying before Selling:
• A rushed selling process might lead to lower offers.
• Contingent offers might be less competitive in fast-paced markets.
• Limited cash for a competitive offer if your money is tied up in your current home.
• Being a landlord may not be ideal, and selling while tenants are in the home can be challenging.
Selling a House before Buying:
Option 1: Make an offer with a settlement contingency. List your current home first, find a new home, and submit an offer with a settlement contingency, contingent on your existing home's sale closing. Works best in sellers’ markets.
Option 2: Find a temporary rental to live in. Closing one sale before starting another can be less stressful and provides more time to find the perfect new home.
Option 3: Sign a rent-back agreement. Proceed with the sale and agree to rent the home from the new owners for some days, giving you more time to search for your next home while accessing the sale proceeds.
Pros of Selling before Buying:
• Clear idea of available equity for the new purchase.
• Easier to roll existing equity into the new home.
• Less stress, focusing on one move at a time.
Cons of Selling before Buying:
• Need to find temporary living arrangements.
• Additional storage and moving costs.
Remember, each approach has its merits and challenges, and it's essential to weigh your financial situation, market conditions, and personal preferences when deciding the best route for your unique circumstances. With the right preparation and the guidance of Scott and The Smolen Team, you can successfully navigate the intricate process of buying and selling a home simultaneously.
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