If you’re considering selling your home while simultaneously trying to buy a new one, you are about to embark on two massive tasks. But there’s some good news: It’s extremely doable. Sure, anything involving the sheer amount of money required to do either can be stressful, but there are industry professionals who are uniquely qualified to ensure as smooth a buying and selling process as possible.
To increase the chances of a smooth and stress-free experience, there are some tips you will need and some pitfalls to avoid. Let’s go through all of it together.
Evaluate The Housing Market
This should be step one no matter if you’re buying, selling or both. The state of the real estate market is most likely the biggest factor in buying and selling, and understanding the health of the housing market is important regardless of where you’re moving to or from. If you’re selling in one market and buying in another, you’ll need to factor that in as well.
You’ve probably heard of the terms “buyer’s market” and seller’s market.” But what exactly does each entail?
Simply put, in a buyer’s market, there are more homes available than people who want to purchase. Buying and selling simultaneously in a buyer’s market means you’ll have a relatively easier time finding a new home than selling your previous one.
Here the opposite is true. In a seller’s market, there are more buyers in the marketplace than homes available for purchase. If you’re buying and selling at the same time in a seller’s market, your home might sell before you can find a new one.
Understand Your Financial Situation
After you’ve gotten a feel for the local market, take a deep dive into your personal finances and get a true measure of the numbers. Here, it’s best to reach out to a mortgage lender in order to learn what’s feasible based on your specific financial situation. The amount of cash you have on hand, along with any home equity you’ve accumulated, and the loan products available to you will all be deciding factors on how you move forward.
An important part of determining your equity is having an idea of how much your home will sell for in the current housing market. A pre-inspection of your current home is a helpful way to learn about the amount of work you’ll need to put into the house before selling or the potential concessions on pricing you’ll have to consider if the buyer covers repairs.
When you’re selling a house with a mortgage, you’ll need to know how much equity you have—that’s the amount of money left over when you take the current market value of your home and deduct the remaining mortgage. One important thing to remember is that your equity won’t be accessible until after the sale closes, so consider if you’re able to purchase a new home without tapping into that equity.
Buying Before Selling Your Current Home
It is possible to buy a new home before selling your current one, but there are steps you can take to make this scenario a success.
Making an offer with a sale contingency means you’ll work to find a new home before listing your current home. Upon finding a new home, you submit your offer with a sale and settlement contingency. This essentially means that you’ll buy the new home only if you can successfully sell your current home. This contingency plan typically works best in a buyer’s market, when the seller is less likely to get multiple offers, as they will still be able to seek other offers.
When you’re confident that your current home will sell quickly, you can request an extension of the closing date of your new home beyond the 30-45 day standard. This action gives you the time needed to sell your current home and use that equity to buy your new home. This tactic is also more successful in a buyer’s market.
Home Equity Line of Credit.
A home equity line of credit, or HELOC, gives you the power to borrow against the equity you’ve amassed in your current home. When you qualify for a HELOC, you can use it to access this money for a down payment and then pay it off when your current home finally sells.
Selling Your Current Home Before Buying A New One
Depending on your current situation, selling your current home before buying a new one might be the best plan. Here are a few tips to help make it happen.
Here, your house gets listed first. Then, once you have an offer, you start looking for a new home. As soon as you find a new home, you submit the offer with a settlement contingency. This enables you to buy the home contingent on the sale of your current home. It’s most successful in a seller’s market, when you’re likely to receive many offers on your home in quick succession.
There are times when closing one sale before starting another is the best and least-stressful option. True, you’ll have to move twice, but it takes the pressure off the timing and enables you to find the exact home you want.
This is when you sell your current home with the agreement that you can rent that same home back from the new owners for at least a few days. You’ll get the time you need to shop for a new home, while also having access to the money you made in the sale. This is best in a seller’s market, when buyers are likely to be more flexible with contract terms.
With plenty of hard work and an experienced lender by your side, you can make the necessary maneuvers to buy the home of your dreams while also successfully selling your current home. Contact Contour Mortgage today to make the magic happen!