After finding or building the perfect new home, selling your old one is the next item on your list. While some homebuyers make an instant purchase and already have guests on the way to the housewarming party, that’s not the practical truth for most. Selling an old home and moving into a new one is a process, but it can be somewhat streamlined if you know what to expect.
Understand the Housing Market
The housing market will be weighted toward buyers or sellers, depending on your area. The group favored by the market will directly influence your strategies. If the market is better for sellers, it might be easier to get a mortgage for a new house. If the market is better for buyers, more people will be interested in your property, but moving into your new home may be more difficult because buying could take longer.
In every real estate market, there are many external circumstances. Having a master plan is a great idea, but things rarely work as smoothly as you might anticipate. Buyers and sellers must work together as closely as possible. If your home inspector uncovers an unexpected problem, be sure to inform your buyer right away. If buying a home makes it difficult to juggle two house payments, ask your seller if you can push back the closing.
If you are a seller, hire an appraiser to assess your home’s worth. Don’t be afraid to lower your home’s price if needed. Otherwise, you may end up with double mortgages. Once you have your home appraised, let any potential buyers see the results. This will let them know why you are asking a certain price, and assure them you are honest about your home’s value.
Many sellers use contract contingencies to speed the sale of their old home. If your next purchase is contingent upon selling the prior home, both you and your homebuyers have more time to house hunt. Additionally, it is easier to specify buying and selling periods with a contingency contract.
If you are the buyer, take as much time as you need to search for a new property. Don’t buy the first home you see. You can negotiate to stay in your current home for 90 days or longer, but don’t do so if you can’t afford two house payments. When examining a property, ask for plenty of details and don’t be afraid to wait. If, for instance, a home inspection will take a few days, allow for that time. It’s better to buy a home you feel safe and confident in than to make a purchase under pressure.
Know Your Financial Options
The financial side of buying a home often is the most difficult. Numbers and options can easily bog down sellers and buyers. Looking at solutions one at a time will keep you from being overwhelmed – it’s also better to know ahead of time which options work best for you.
If you are selling before buying, consider a rent-back agreement, which allows you to stay in your current property for 60 to 90 days. In this agreement, you can pay rent to the buyers, sell your home for a lower price, or both. This gives you extra time to examine properties.
If you’re buying first, discuss ways to decrease risk with your realtor and financial advisers. Many people plan to sell first and use the proceeds to buy their next home, but are unable to do so because of timing. In these cases, a bridge loan is helpful. A bridge loan is a short-term loan that lets you own two homes simultaneously; you repay the loan when your original home sells.
Other homebuyers rely on contract contingencies. These are good options if the housing market is lean or if your seller is not attracting interest. In a contingency, you may only purchase a new home once you successfully sell your old one. A contract contingency may add pressure, but it also may ease your overall financial burden.
Some homebuyers borrow money from family or friends to secure the down payment on a new home. In those cases, the person lending the money receives a promissory note to ensure he or she will be paid back upon sale of the old home. The homebuyer uses a deed of trust on the new home to secure the promissory note. If you choose this option, be careful about how you arrange monthly payments. Just be aware that some banks may not approve loans based on down payments that originate from borrowed money.
Whatever your strategy for buying and selling your home, our experienced staff can help you through the process. Contact us today!