Ah, to be a home buyer again. Living on the upper hand of a Hot Sellers Market makes you fil on top of the world. Then, the stress of having to be in the house hunt mode can seem daunting at times. Carrying another mortgage on your back at the same time may or not be feasible. We’ll address the feasibility in one sentence. If you have more than 30% equity in your home today, reach out us and we will connect you with one of our great vendors who may be able to assist you in buying a home before you sell.
If you’re looking to graduate from seller to buyer again, you know things are about to get much trickier. Unless you’re a bona fide house collector, you’ll have to sell your home in order to buy a new—adding a whole separate layer of anxiety to what you already know about the home-buying process. Maybe you feel like you have to take anything you can get, minus everything that you need and want.
In an ideal world, you’d buy a new home, move, and then, when all the dust settles, deal with the turmoil of selling.
But for most people, that’s totally unrealistic. Not only does it cost a lot, since you’ll be paying two mortgages at the same time, but sellers of your potential new home might be quick to judge if you’re holding on to your current home. Drew Snyder, a Realtor® with Snyder Sutton Real Estate in Topanga, CA, says one of his clients had difficulty getting sellers to “take them seriously unless the house was on the market or in escrow. As soon as we put it on [the market], they were considered as serious buyers.” (Realtor.com)
So, while shopping for a new home and selling your current home at once may sound like a real estate nightmare, it may be your best option. Here’s what you need to know to make sure both processes go as smoothly as possible.
Know the market first
Before you start seriously searching for a new home—or put your current home on the market—make sure you have a solid understanding of the housing market in your area (and the area where you’re planning to buy). One way to play it safe is to keep your mind open to lots of buying options. If it’s a seller’s market, you might find that you’re able to get your home sold quickly, but that the homes you tour with your real estate agent just aren’t up to par. If you can widen your search and find multiple homes you’re interested in, you’re less likely to find yourself in trouble if a purchase falls through—selling your current home won’t leave you stranded.
Plan your schedule carefully…
You might be asking: Should you try to buy first, then sell—or vice versa? Both have their risks and rewards. Selling first makes getting a mortgage easier, but it also means you’ll need to find a temporary place to live. Buying first means that moving will be easier, but it also may skews your debt-to-income ratio, making it harder to qualify for a new mortgage—not to mention the difficulty of juggling two monthly house payments. Your down payment may be difficult to come up with, too, if all your money is tied up in your old home.
Whichever option you choose, make sure you’re prepared to accept the consequences: either having to store your stuff and rent temporarily, or undergoing the financial burden of dual mortgages. The Tucker Team are your trusted Advisors. We can slow it down and put the strategy in place.
… but don’t rely on timing
When buying and selling a home simultaneously. Remember: You’re not the only party in this equation. For every seller there’s a buyer, for every buyer a seller. While things might appear to be working smoothly when viewing your master plan from above, that doesn’t take into account the varying fortunes of the people you will be working with. Closings are rife with delays. Your buyers might have difficulty securing their mortgage; your home inspector may bring up issues that need to be fixed before you can move in. Let The Tucker Team manage this for you. So even if you’ve planned to sell your home first and are prepared to rent while buying, know that even the best-laid plans go awry—and that you might end up juggling both mortgages. Preparing yourself for this (however remote) possibility ahead of time will ensure a smooth transition.
Know your financial solutions
For those who choose to sell first, the process is relatively straightforward: taking on the additional cost of a rental between homes.
However, you might want to consider the option of a rent-back agreement, where you negotiate with the lenders and buyers to be able to remain in the property for a maximum of 60 to 90 days—often in exchange for a lower selling price or for rent paid to the buyers. This can relieve some of the pressure of finding a new home, giving you additional time to house hunt.
But if you’re buying first, talk to The Tucker Team about ways to decrease your financial burden and risk. Here are the two most popular options for buyers:
- Contract contingency: Buyers can request that their new home purchase be dependent on the successful sale of their old home. If you’re looking in a competitive market, this may not be a good option. However, if the seller of your intended home has had difficulty attracting interest, this may be a good deal for all parties involved—assuming that you can persuade them that your home will sell quickly.
- Bridge loan: A bridge loan allows you to own two homes simultaneously if you don’t have deep pockets for a second down payment. This option is especially attractive if you’d planned to sell your home first and use the proceeds to buy the second. It functions as a short-term loan, intended to be repaid upon the sale of your original house.
Don’t let fear rush you
If your home has sold but you haven’t found a new place to live, don’t let anxiety push you toward a bad decision. Did the Tucker Team find the perfect home right on schedule? That’s great. But don’t feel that you have to compromise on things that are important to you just because you need to find a home. Conversely, don’t accept a bid that you feel is too low just because your finances are strained by two mortgages. If you have a temporary apartment set up, you’re less likely to compromise. Certainly, selling and buying a house simultaneously will be stressful—but carefully considering and planning for the risks and hurdles can mitigate the stress. The Tucker Team and our vendor partners are diligent and skilled to perform the hard work necessary to fulfill your needs.