So, you are thinking of buying a home, but you have to sell your current home in order to make that happen. How do you do this at the same time? Sounds pretty complicated, and if it is not handled correctly, it can be. The process of selling a home or buying a home can be stressful enough as it is without adding the complexities of trying to do both at the same time. Where do you start? With the sale of your current home? But how can I start to sell my home if I do not know where I am going to be living?
I want to take a few moments and break this down for you step by step so that you can be empowered to make the right choices when faced with a situation where you need to sell and buy.
You have a couple of CHOICES:
You can sell your current home before you buy another house or you can buy another home and then sell your current home.
Either approach can work when handled correctly, and if you are working with a team of professionals that has handled this situation countless time before.
Selling before you buy
You may need to take this approach because you can not afford to buy a property without selling your current home. Don’t worry… Alot of home owners are in this exact same situation. They need the equity out of their current property before they can move ahead. They also are not sure of the current market value of their current home, so they need to make sure that they have a contract on their current home before they start shopping. If you have a unique property you may also want to make sure that you won’t have trouble selling your home before you start shopping.
What do we mean by unique?
– You have a property that is not similar to the others in your neighborhood, because of the way that it was originally built of because of the work that you have done on the property. IE having a house with a second level, when all of the others in the community are still single story.
– You have not made the upgrades over the life of the home to keep pace with the current market. It may have been a property that you inherited from your parents and you have not had a chance to update the kitchen or the bathroom.
You may have the money to make the down payment on the second house but you are not in a position to make two mortgage payments. This monthly drain on your resources would be enough to make you wait. Not to mention the potential maintenance issues that could pop up during that period. Add to this the insurance, the property taxes and other associated expenses and you realize that it would be better just to wait.
But wait until when?
There are a couple choices that you can make:
– Wait until you have a contract on your current home until you start looking for a new home.
This ensures one thing, that you atleast have someone interested in your current property before you start looking. In all honest, that is about all that it guarantees. The purchaser of your home still has to deliver and follow thru in order for you to not be in the position of owning two homes.
Sometimes you can include a “Home of Choice” clause in your contract with the purchaser allowing you a set amount of time to find your new home or else the contract with the purchaser is not valid. This will only work if the purchaser of your property really feels like they are getting a good deal and they really, really, really, want your home. Otherwise this clause can scare them off. Why? Because a savvy buyer knows the you have other choices.
– Wait until all of the contingencies from the purchaser have been removed and appraisal is finished and the financing is finalized.
By this point, 25-40 days after the executed contract, you will have a better feeling of the solidness of the contract that you have with the purchaser of your property. These indicators may be just what you need to make sure that you can actually sell your home and can afford the next home. For some this is the ideal time. It may put a bit of added pressure onto you to find a new home, but you know that when you do you are not likely to have the old home hanging over your head. And you may have already been prepared to follow the 3rd choice anyway…
– Wait until your home has sold and the check/funds are in your account.
This is the only way to make 100% sure that you are in a position to be guaranteed that you can buy a new home. Because you are no longer obligated to the first home and you have your money in your pocket. Granted. This approach will mean that you will need to make arrangements for temporary living while you are waiting for your new home to be ready for you to move in. This will require logistical planning for you and your belongings. Short term storage may be just the answer for you so that your possessions are secure and left in a state where they are ready for you to move right into your new home. While this may sound like a hassle, it is an approach that will ultimately give you the peace of mind to move forward and truly find the home of your dreams and not feel rushed to make a snap decision.
With any of these choices, it is imperative that you speak with a mortgage professional from day one to make sure that you are in a position to move forward if all of the other dominoes fall into place. You don’t want to sell your home only to find out that because of your credit score or a past collection that you can not get approved for a new loan. Doing so may also provide you with an opportunity to perform some credit repair steps while your prepare your home for sale.
Buying before you sell
It makes sense. You want to make sure that you find the home that has the features that you are looking for before you go thru the hassle of allowing strangers to trample through your property during open houses. You are selling for a reason. To downsize or rightsize of you have to have a particular pool or waterfront location. And until you find it, there is no point in selling your current home. Plus you do not want to be caught without a roof over your head.
Or you are finally at the point that you will only buy a home if it is in a particular school district zone. So you have to make sure that you can find the home of your dreams before you part with your current home.
You have some choices:
– Find of the home of your dreams and ask those sellers to wait for you to sell your home.
A sale of home contingency may be just the answer for you, if it is negotiated and handled correctly. Or it could become the biggest headache you have ever had in your life. The sale of home contingency ask the home owners to take their home off of the active market while giving you an opportunity to sell your home. And if someone in the interim comes along and wants the home and can act upon it right away, then you have the chance of getting “kicked out” of the contract. This approach will open you up to some scrutiny. From the home owner and there agent. They are going to want to monitor the selling process of your current home. What price you set on the home? How it compares to others? How frequently you are going to reduce the price to get it sold? The terms and conditions that are included in the potential contract that you accept. Are you ready to have someone else sticking their nose in your business? Can you blame them for wanting to know.
Some home owners and their agents take the approach that they are not going to accept a sale of home contingency. They feel that you should “get your act together” first and if after doing so (by getting atleast an executed contract on your property) then you can come back and if the home is still on the market, then they will talk with you.
Also, with this approach, your ability to negotiate on other items, like the price of the property that you are purchasing or any repair items revealed in the home inspection period can be greatly reduced.
– Buy a new home and if needed rent out your current property.
WARNING – You have got to make sure with 100% certainty that the income that you will be generating from the rental will be credited to you by the lender for your new property. Since the financial meltdown, the way that banks have been counting rental income has changed considerably. They want proof. And if you just started a new lease and don’t have a track record, then you will be out of luck. Not to mention that the current mortgage DEBT with still count against your ratios. This may just be a great fall back position, but you need to verify before you settle for this option.
– Buy a new home and make both payments.
If you are in this position, then as they say in Australia, “Good on ya”. But be prepared to be doubted and have to prove it more than once, via either a disclosure of proof of funds or a complete financial loan APPROVAL prior to moving forward. Because this situation is frankly pretty rare, you will be required to verity in manners that the typical home buyer does not. While it is not fair, it is understandable for the owner of the property that you are purchasing to want more information. You would want the same.
So, can you sell and buy at the same time? YES!!!
Just be prepared to make some choices along the way, and make sure that your are working with an agent that understands the complexities of your situation and can work with you regardless of the choices you make. We are here to assist you.
Also ask about our sell and buy reward…