Have you been thinking about buying your dream home, but all your funds are tied to the equity in your existing home? In a perfect scenario, you close on both a house sale and a house purchase on the same day. In reality, those timelines will not match up exactly, but with the right strategy, you can buy and sell at roughly the same time. Here’s how.
Get Ready
Be prepared to both buy and sell before you get started. Talk to a lender about getting pre-approved so you can come in with a strong purchase offer. To sell your house, make sure it’s clean, well-staged, and in good condition.
Selling First
As an experienced Realtor, I often advise clients to sell the old house first. By doing that, you avoid having two mortgage payments, and the proceeds from the sale of your old house can be used toward the purchase of your new home. However, you can run into the problem of being between houses if you don’t have a purchase lined up. Although we often think of contingencies for buyers, sellers can also have contingencies to ensure they are able to purchase a new home.
One option is to have a rent-back agreement with your buyer. With this condition, you agree to pay the buyer monthly rent for a set amount of time after you close the sale. Alternatively, you could negotiate a lower selling price in exchange for staying in the house longer. Either way, you don’t have to find a new place to stay while you wait to buy.
Another option is to include a contingency that will keep the sale on hold until you buy a new house. In this seller’s market, it’s much easier to sell a house than to buy one. A shortage of houses for sale has created a lot of competition between buyers. If you opt to sell first, this contingency can protect you from getting forced out of your house before you find a new one.
Buying First
Because it’s a seller’s market in the valley, buying first could work in your favor. Once you have a purchase lined up, selling your old house should be easier. What makes buying first hard, though, is that you need enough cash for a down payment and closing costs, and you will have to get approved for a new mortgage while you still have the old one.
For more security on your end, you can include contingencies in your offer as the buyer, such as holding off on the deal until you sell your house. Keep in mind, though, that while this protects you as the buyer, it’s a hassle for the seller. In a multiple offer scenario, which is common in the current market, the seller may prefer an offer without contingencies.
You might also consider doing a mortgage recasting once you've sold your home as a way to lower the monthly cost of your new home. You can use funds from the sale to pay down a larger lump sum toward the principal balance of your mortgage. Then the lender would re-amortize the loan, so your monthly mortgage payments are reduced and the amount of interest you'll pay over the life of the loan is also lessened. However, while recasting will lower payments, interest rates and loan terms remain the same.
Ready For Your Dream Home?
There will always be some risk when buying or selling, and it can be tricky to do both at the same time. But if you are ready to move into your new home, you can use today’s market to your advantage. Reach out to me so we can discuss the best strategy to get you into the home of your dreams.
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