Unless you are one of the rare homeowners with the financial ability to pay two mortgages at once, buying a home before selling your current home is not really an option. Given the fact you need to sell your current home to pay for a new one, you will need to prepare yourself for a certain level of uncertainty. Even doing everything right, you may find yourself in limbo for a short period of time. Take heart, though. Most homeowners are able to sell their homes, purchase a new home and move before ever needing to rent temporary housing.
In fact you would not believe how many times buying and selling a home at the same time occurs.
Trust me after selling real estate for the past twenty eight years it happens a lot! Since most people do not have the financial luxury of being able to purchase another home first, selling and buying often coincide.
Selling And Buying Simultaneously
The home buying and selling process can be time consuming, and there are few guarantees. Unless you have a highly desirable home and are willing to part with it for only a fraction of what it is worth, you are probably going to need some time to sell it. The fact that you will need to spend time selling your home means that buying another home at the same time is typically not a workable proposition, unless you are willing to pay for both homes at the same time.
Even if you are willing to take on two house payments simultaneously, will lenders be willing to lend you money on both homes at the same time? Unless you are very well off, with valuable assets to put up against the loan, lenders will probably not be interested in taking on the risk.
All of this means that you should expect to sell your current home before you purchase a new home. It may take some work and a little bit of faith, but you can do it. Many, many other homeowners have done exactly the same thing, and so can you.
What About Selling Contingent on Finding Another Home?
Another avenue that some people try to take when buying and selling a home at the same time is to try to make selling their home contingent on finding another home. Frankly, this is a HUGE mistake! When you make selling your home contingent on finding another home your place in theory is NOT really for sale. At the drop of a hat you can tell a buyer – “sorry I could not find a home you are out of luck”. In a hot real estate market there are very few buyers who are going to be willing to do this. Put yourself in the buyers shoes for a minute. You are out looking at homes and find the one you love. When reading the fine print in the listing you discover that it says something like “subject to finding suitable housing.”
As a buyer how can you begin to think about spending money on a home inspection, applying for financing, hiring an attorney for contract review, etc, if in fact you really might not be getting the house? Who wants to throw that kind of money away?
More importantly what if the buyer has a home that is under agreement with a closing date that is coming up in the near future? They are going to need to know if they actual have a home or not, otherwise they will be out on the street with nowhere to go.
If you are selling a home this is a great way NOT to get top dollar for your home. Any good real estate agent will tell you that getting top dollar for your property is all about supply and demand. The more potential buyers their are for your home the better. With a clause like this inserted into your listing agreement you will be eliminating tons of people who would even consider such an arrangement. This is a great way to sell your property for less money than you should!
What About Buying On Contingency?
Once upon a time, there was a way to make an offer to purchase with a home sale contingency. Essentially a home sale contingency allows a buyer to make their purchase subject to selling their home. Buying on contingency was never that popular because it left sellers holding the bag when buyers were unable to sell their homes, something that happened quite frequently.
The drawback to a home sale contingency for a seller is losing complete control of the process. How does the seller know the buyer will price their home properly and do what it takes to get the property sold? They don’t! The seller in this situation is at the mercy of their buyer doing what’s necessary. Often times they don’t.
Today, it is nearly impossible to find a seller that will accept this kind of deal. Why should they? There are lines out the door of willing home buyers who have no need of a contingency deal.
Do not expect to find a home seller willing to make a contingency deal with you. Although it is possible, there is no need to go chasing something so unlikely. It is better to just accept the reality of your current situation, and do what most other homeowners do. Sell your current house, then buy another one as quickly as possible.
Proof Via Mortgage Pre-Approval Letter
Over the last twenty eight years of selling real estate, I have come across some folks that will try to pull the wool over the eyes of others. They think they are smarter than the next guy but in reality they end up digging themselves a hole that is hard to get out of. What do you mean Bill? When I am representing a seller and get an offer from a buyer one of the first things I will do is find out about the buyers current housing status. In other words do they have a home to sell.
Sometimes a buyer will submit an offer with a pre-approval letter but they have a home to sell in which they need the equity out of in order to close on their purchase. Some of these folks think that by just submitting a pre-approval letter and asking for a longer close date to give themselves time to sell their home they have outsmarted everyone – WRONG!
When getting an offer from a buyer and they currently own a home I will always ask for language to be inserted into the pre-approval letter that says getting the mortgage is not subject to the buyer closing on their current property. If the lender does not produce this language in the letter I explain to the seller that they would be in fact accepting a contingent sale. Ninety nine percent of the time the owner will say thanks but not thanks! They will be grateful I have looked out for their best interest.
Taking The Right Steps to Sell and Then Buy
The following steps are what most people take when they currently own a home, but they want to buy another one. Having a proper game plan will allow you to buy and sell a home at the same time.
Spend Some Time Searching
When you do sell your current home, you want to be able to buy another home quickly. Given you want to move quickly, it is wise to narrow down your search to specific areas, and even specific types of properties, before you list your current house. Spend some time with your Realtor to discuss your desires, and get serious about finding where you are going to buy and what types of properties you are wiling to make offers on. Get comfortable with specific neighborhoods you like and scout out available inventory that you can picture yourself living in. You want to make sure there are enough available homes that you like once your home goes under contract.
List Your Current Home For Sale
Now you take the plunge. Have your real estate agent list your home for sale. Just make sure you don’t list for sale before your home is ready. Take the necessary time to make sure your home and mindset are well prepared for what awaits you. Do what needs to be done to make the sale happen quickly and to fetch the highest price for your home.
Selling a home is a subject deserving of its own article. It is enough to say that you should find an agent you really trust, and listen to what he or she says closely.
When you do get an offer, you can try to push back the closing date as far as the buyer will allow you to. The average time from an offer to closing is typically six to eight weeks. The closing date however is always subject to negotiation. If the buyer really wants your home they will probably be as accommodating as possible. This may be less objectionable than putting a disclosure on the purchase about you finding suitable housing. To really sweeten the pot and get a longer close date, you could also offer to pay the rent of the buyer until you buy a new home or give them a further discount on the price of your home.
Make an Offer on a Home
When you get an offer on your home, you can then make your own offer on a home that you want. What you are going to need to do is structure your dates in the contract such that you have as limited risk as possible. For example, you will want to make your mortgage contingency follow the mortgage contingency date your buyer has in the contract to purchase your home. This way if something happens you will have an escape with the sale that prevents you from losing your deposit.
As long as both offers go through, you should be able to sell and buy very close together. The majority of homeowners manage to do this without even needing to rent temporary housing. On most occasions when buying and selling a home at the same time, the closing for both the buy and sell will happen on the same day. The closing on the home you are selling will take place in the morning and the home you are buying in the afternoon.
What is The Worst Case Scenario?
When you are trying to sell your home and buy another in a short time span the worst case scenario is really getting your home sold and then finding you don’t have anything suitable to purchase. While this does not sound all that inviting it really isn’t then end of the world. You are going to need to plan for a few things. More than likely finding temporary storage for your furniture and other large items will become necessary.
The other thing you are going to want to have a good handle on is how to pack your home for a temporary move. While having a double move is never pleasant at least you have your home sold. You can relax a bit instead of feeling so much pressure of finding a home and possibly purchasing something you will regret later. Renting a place in between will allow you to search more comfortably at your leisure.
You Can Do This
It is normal to feel a little nervous about trying to juggle so many balls at once. You are dealing with big transactions here, and you are talking about shelter and comfort for you and possibly your family. Of course you want it to go well.
Fortunately, it usually does. But even if there is a gap between your home sale and the purchase of your new home, you can always rent temporary housing or stay with friends or family. It may not be ideal, but it will also probably be a situation you laugh about years from now, when you are comfortable in a home you love.