A growing family, the need for more room, additional income and a career change: 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 good 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 HOUSE 1ST
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 local rental – before beginning the search to buy another one. Investigate the prices of houses in your area; to sell high and buy low you desire a clear assessment of how much homes are going for in your town. Your agent can help you with this by providing a record of comparable sales in your area.
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 creative financing versus purchasing a home first. You are aware of the exact amount of available income you will have after your sale and exactly how much you should have to completely finance.
BUYING ANOTHER HOUSE FIRST
To alleviate the stress that comes with relocating to a hotel or a momentary rental house, buying another home as you prepare to sell your current one is your best option. This is especially true in the case of a buyer’s real estate market. In your offer, ask the seller to make your purchase contract contingent on selling your home. Sellers will not always agree to these conditions, in fact, it is in these instances that you must go for a second mortgage.
The burden of carrying two home loans at the same time is often overwhelming, both mentally and financially. You will also have to manage security, basic utilities and general maintenance of your vacant home. Because of this, buying a new home before selling your current home is most practical when your current home has already been paid off.
Another option – and one which comes with hazards of its own – is to rent out your current home rather than selling it after purchasing and moving into your new home. This allows you to bring in some income while you wait for the market to stabilize and your home prices in your area to rise. Turning your property into a rental is a practical way to buy a new home first, even when your home is not mortgage free.
SELLING AND BUYING SIMULTANEOUSLY
Buying and selling simultaneously is tricky, multi-faceted and perhaps the best plan of all for a move-up buyer. You must input all the requirements, including all financing and legal documents, on the stand for this plan to close without the hurdles. To arrange the necessary finances for this plan, consider bridge financing options.
One option is to borrow down payment money for the 2nd house from your family or friends. You can use the down payment to secure loans from banking institutions, although some banks do not accept deposits that are not a true reflection of your available resources. Applying for a link loan from a financial institution is another viable option, and this involves applying for an 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 hazards involved in buying and selling at the same time, it’s the best-case scenario for many homeowners. If you decide this option fits your needs, a knowledgeable and experienced Realtor is your best wager 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 position, your requirements and the overall climate of you region’s real estate market. Find out if you are getting 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.