Buying a home while needing to sell another can be an incredibly stressful affair when unaware of the steps needed to accomplish such an endeavor. From costs to logistics, one trivial element can derail the entire move or worse, cost you thousands. Luckily, you are being proactive so you can be among the many homeowners each year who successfully buy and sell a home at the same time.
1. KNOW WHAT YOU WANT
Let’s face it, there are endless options for housing. Whether it’s number of bedrooms, number of stories, back yards, pools, HOAs, or just a change of location, listing out what your ideal next home needs to have will help guide the decision to make the move.
2. KNOW THE COSTS ON BOTH SIDES
What is your home worth? Buying and selling a home can be costly. Meeting with the right real estate agent and lender is a critical step so you can be crystal clear of the anticipated proceeds and costs on both sides of the process. In some cases, a move doesn’t make financial sense so it’s important to find this sooner rather than later.
3. DETERMINE THE BEST OR “COMFORTABLE” ROUTE
There are multiple ways to accomplish the same goal. While each will come with its advantages and setbacks, only you can determine what will be in your best interest. Here are some of the ways to get this done without a fear of being homeless.
A. Get your current home under contract (Sell 1st)
The most common and recommended route is to list your home for sale and secure a buyer before submitting offers on a replacement property. This allows you to know your bottom line as well as dictate timelines as you move to the purchase phase.
B. Get your new home under contract (Sell 2nd)
Although much tougher to accomplish, locating your new home and getting it under contract prior to yours can be done. Your timelines and pressure to find a buyer for your home are intensified so if you don’t do too well under pressure, I wouldn’t recommend this.
What is a Contingent Offer?
A Contingent offer on a property is an offer to purchase conditioned upon the ability to sell another. In other words, you are telling the owner of the property you like “I will buy your property at this price if I can sell mine”.
The obvious downside in being a contingent offer is unless you are the only, or highest offer on the table, it will be the least desirable option. Keep in mind, the seller has no idea what your property’s condition is like and if you will even be realistic in your asking price to sell in a timely manner.
Another draw back is the fact that both sales will be interconnected which doubles the chance it won’t work out. You now have 2 inspections (one for each), 2 appraisals, and 2 loans being financed. One hiccup and both sides come crashing down. Real estate is fun isn’t it?
C. Sell outright, then Buy
The last option is really straight forward. You list your home for sale, get it sold, and then purchase your new property. In this case there are no Contingent offers on either side. This gives you the most leverage and flexibility when negotiating on both ends of the process.
How can this be accomplished? There are two possible ways to do this.
1. Negotiate a rent-back with your buyers.
A rent-back is just want it sounds like. Both parties agree to rent the property back to you once the home has sold for a predetermined amount of time. (ie. 45 days) This option gives you the ability to write non-contingent offer without the added sense of urgency.
Caution: Once your rent-back is up, you will need to move out even if we haven’t closed on your new home unless the buyer agrees to extend it.
2. Temporary Housing
The 2nd way to do this is to have a place to say in between the sale and purchase. Be it staying with family members or a month-month rental giving you the flexibility to purchase on your own timing.
4. SWEAT THE DETAILS
Most issues can occur when the details aren’t properly addressed at the very beginning. The most common example I see has to do with move-out dates. A seller will accept an offer on their property to close on a certain date which needs to occur prior to closing on their new home. The problem is once you close on your former home, the new homeowners expect to take possession that day. How do you move out when you have no where to go? Unless this is addressed at the time of the offer, this can create issues which could easily have been avoided through the form of a rent-back or negotiated extra days after closing. This is where your real estate agent’s experience comes into play.
5. BE FLEXIBLE
Selling and buying a home has many moving parts. Being aware and able to anticipate the possible pitfalls can make this a more manageable experience but being flexible and able to adapt to changes throughout the process will make this a move you were happy to have taken on.
Have more questions about your possible move? Call 619.430.4380 to set up a free and no obligation consultation with Daniel Di Matteo.
