A growing family, the need for more space, additional income and job relocation: These are just some of the factors that trigger people to sell their existing homes and set search for a new property. Selling and buying at the same time is not only risky, but it also requires acute awareness of the real estate market. There are many ways to avoid the common pitfalls that come with a two-sided transaction; follow this guide for the best success.
Selling Your Current Home First
If you are wary of risks, this plan is the safest. Lay out all the framework for selling your current home – finding a listing agent, signing the listing agreement and securing a short-term rental – before beginning the search to buy another one. Investigate the prices of houses in your area; to sell high and buy low you need a clear comparison of how much houses are going for in your town. Your agent can help you with this by providing a report of comparables.
Selling your home first gives you enough time to shop around for better and cheaper homes that fit your needs. Further, there is less stress involved with the buying process, since this method relieves the stress of temporary financing. You are aware of the exact amount of available income you will have after your sale and exactly how much you will need to permanently finance.
Buying Another Home First
To alleviate stress that comes with relocating to a hotel or a temporary rental house, buying another home as you prepare to sell your current one is the best option. This is especially true in the case of a buyer’s real estate market. In your offer, you can ask the seller to make your purchase contract contingent upon selling your home. Sellers will not always agree to these terms, and it is in these cases that you must go for a second mortgage.
The burden of carrying two mortgages at the same time is often overwhelming, both mentally and financially. You will also have to take care of security, basic utilities and general maintenance of your vacant home. As such, buying a new home before selling your current home is most practical when your current home is already paid off.
Another option – and one that comes with risks of its own – is to rent out your current home instead of selling it after purchasing and moving into your new home. This allows you to bring in some income while youwait for the market to stabilize and the home prices in your area to rise. Turning your property into a rental is a practical way to purchase a new home first, even when your home is not mortgage free.
Buying and Selling Simultaneously
Buying and selling simultaneously is tricky, multi-faceted and perhaps the best plan of all for a move-up buyer. You must put all the requirements, including all financing and legal documents, on the table for this plan to close without any hurdles. To arrange the required finances for this plan, consider bridge financing options.
One option is to borrow down payment money for the second house from your family or friends. You can use the down payment to secure loans from banks, although some banks do not accept deposits that are not a true reflection of your available resources. Applying for a bridge loan from a financial institution is another viable option, and this involves applying for a HELOC loan, or a Home Equity Line of Credit, which is a short-term loan. Some lenders do not like short-term equity loans, so apply for HELOC in advance of buying another house.
Even with the risks involved in buying and selling at the same time, it is the best-case scenario for many homeowners. If you decide this option is right for you, a knowledgeable and experienced Realtor is your best bet for a smooth transaction.
There is much to consider when selling your home and buying a new one; luckily, you are not without options. Examine your financial status, your needs and the overall climate of you region’s real estate market. Know if you are entering into a buyer’s or a seller’s market before you make any decisions as to which path to take. With your homework and the help of your real estate agent, your transactions can go off without a hitch.