For the ultimate sugar and stress high, buying a new property while selling your existing one can be one of the best. Especially if a high percentage of your existing or new properties are mortgaged to the bank. Many of us don’t have any choice of course, as the equity from your existing house is needed to put into your new place. What you do have a choice in is whether you buy or sell first, or whether you throw it all in together, push blend on selling/buying simultaneously, and cross your fingers it will all turn into the perfect property smoothie.
Buying and selling a home at the same time can be more complex and challenging than doing just one transaction, but with the proper planning it can be successful. Understanding the steps and being proactive can make the transition much easier.
Do your research
First, make sure you evaluate the market
It’s important to get a good idea of what the real estate market is doing, so that you can take the correct approach to selling and buying. For instance, you will want to determine if you’re in a buyer’s market, or a seller’s market. Having an experienced real estate agent can help you with this and is highly recommended. Not only will they be able to give you an idea of what the housing market is currently doing, they can also help you evaluate what this transition will be like for you financially.
Next, take a hard look at your finances
With that in mind, it’s time to think about what your current home will sell for, realistically. Sure, we all want the most we can get for our homes when we sell, but you need to take an objective look at the value of your home, evaluate comps in the area, and act accordingly. Being realistic about financial expectations will make the process much smoother in the end, as you will be financially prepared to make the transition.
One important piece of information to also consider is the amount of equity you have in your current home. While the equity you have in your current home won’t be available to you until after the sale closes, it’s still valuable information to have. I’ll explain why in a moment, as it depends on the approach you take to buying and selling properties.
Approach #1 – Buying Before Selling
You could consider buying a new home before selling your old one. There are many ways to do this, such as:
Buying your new home, and hoping that your current home will sell quickly
If you’re in a seller’s market, you might be able to take a risk and buy your new home while still waiting for your old one to sell. If you feel confident your home will sell for the price you’ve set, then it might be worth it to take a calculated risk and follow this approach. If you’re NOT in a seller’s market, or you don’t feel confident about the sale of your current home, you may want to consider other options.
Buying your new home with a sales contingency
Buying with a sales contingency can reduce the risk of buying a home before selling, because it basically means that the purchase of your new home has a contingency which states the sale will not go through if your current home doesn’t sell by a certain date. If the sale doesn’t happen, you get to back out of the purchase contract entirely. While this may offer an upside to the buyer, seller’s may not be so enthusiastic about this option. Think about it from their perspective; if you were selling a home and you had two reasonable offers, but one of them had a sales contingency with a chance of backing out, which one would you choose?
Buying with a bridge loan
Many times, sellers will use the money that they make on the sale of a home to purchase their next home. However, the home buying and selling process can sometimes take a little while, and if closing dates don’t line up on the various properties, there may be gaps where outside funding might be needed in the interim to facilitate the transactions. This is where a bridge loan comes in; this is basically a loan you take out for a short period of time to cover your down payment and closing costs on a new home, that you would pay off with your newly released equity from the sale of your old home. The goal here is to have the bridge loan for the shortest amount of time possible, to reduce the interest you would pay for this loan.
Using a home equity loan to make the purchase
A home equity loan is basically what it sounds like; buyers use the equity in their old home, which they plan to sell, as collateral on a loan to purchase the new home. It’s kind of similar to a bridge loan but might only be feasible for buyers that already have a lot of equity in their previous home. This is especially true if you are downsizing to a smaller (and presumably less expensive) property.
Alternatives to selling your current home
Sometimes, it might not be a bad idea to hang on to your current property. If you can make it work financially, and the demand is there, you could rent your old property and continue to build equity in that property. Furthermore, if you’re in a competitive seller’s market, your house might not sell for a little while. That doesn’t mean you can’t still rent it in the meantime, though. Might as well make some money, even if your home doesn’t sell right away!
Approach #2 – Selling Before Buying
Alternatively, you could consider selling your current home before buying your new home. This approach works a bit differently than buying before selling. There are multiple ways to do this, such as:
Sell your home, and hope you can find a new one quickly
This method is appropriate in a buyer’s market, as you have a bit more leverage and could reasonably depend on the market to help you find a new place quickly. There are still risks involved, however. If you don’t find a new home quickly, you may end up having to pay for temporary storage of your belongings, renting, etc. which are all expenses that can all add up quickly. Be sure to consult your agent to determine if this approach is realistic for your current market and the homes that you’re interested in. If you have many requirements or stipulations about the neighborhood you want to live in, the number of bedrooms/bathrooms, and other amenities, that may make it harder to find a suitable property to buy.
Extend the closing process
Most of the time, it takes about a month to close on a home. While this may sound like enough time to get things done, sometimes it’s ideal to have a little more time. As a seller, you can ask your buyer for a longer closing period to give you time to find a new home. Not all buyers will agree to this, but others might prefer this arrangement. For example, if the buyer has a lease at a rental property that doesn’t expire for two months, it might be ideal for them to extend the closing process as well and avoid early termination of their lease. It’s a win-win!
Request a “rent-back” clause
Let’s say you sell your current home to a buyer, but you have not yet found a new home to purchase for you and your family. What do you do? One option is to ask your buyer for a rent-back clause, which allows you to rent the property from them until such time that you are able to move into your new home. This could give you the extra time you need to buy a new property and relocate, while ensuring that you still have a roof over your head. Sounds a lot less stressful, doesn’t it?
What next? Choose an Experienced Real Estate Agent
You’ve got a lot of options when it comes to buying and selling properties. How do you decide what’s best for you and your family? Well, one thing’s for sure: working with an experienced real estate agent is a great way to remove a lot of the mystery from the process. Real estate agents are sources of knowledge and encouragement that can walk you through the entire process, ensuring that you are able to sell your current home, and buy the next one, while reducing the headaches that can occur throughout the process.
Think about it. A real estate agent’s full-time job is to act as your representative. They have access to see lots of properties in your area and can find homes that meet your needs. This will save you the time and energy of searching for yourself. They can also track down other agents and sellers, set appointments, and schedule viewings of homes for you. Also, if you’re selling, they can handle phone calls asking about your property, answer questions that buyers or buyers’ agents may have, and schedule viewings of your own property. Finally, they can even help you when it’s time to negotiate, as they have experience understanding the value of homes based on the area, amenities, and more. It just makes a whole lot of sense to have someone in your corner like that, don’t you agree?
Every day I work with people like you who are relocating out of state, especially to Florida. Who do you go to get answers to all your questions? Where do you begin? My goal is to provide answers related to relocating to Florida, the Florida lifestyle, real estate and otherwise. So welcome! Click here to read the full blog post: https://lyndseyashley.com/real-estate-blog/category/relocating-to-florida/
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KELLER WILLIAMS: https://www.LyndseyAshley.com
I am so grateful for all you subscribers, both clients and Realtors, so thanks for watching my videos! Lyndsey is a Sarasota area Realtor with Keller Williams. She loves Sarasota, houses, and helping clients buy and sell real estate.
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Text: (941) 260-6025
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