Many home buyers are like my family, you purchase the home you currently live in and works great for you. Then a few years down the road all of a sudden you realize you’ve outgrown your home, but the thought of buying a home while selling one at the same time has a lot of moving parts to it. And that is down right terrifying for most people.
Part of it is because first-time home sellers consider how tricky this process is until they actually find the perfect home that they want to move up to and have to do it. Truth be told, buying a new home while you are still living in your current home can create a long string of dominoes. If one of the dominoes fails to tip over in the line, the whole thing falls apart. In today’s blog post I’m going to walk you through the process to help ensure that all of the pieces come together easily for you.
There are 4 ways you can buy and sell a home simultaneously:
#1 – Closing Contingent:
Most homes are sold on a contingency. This means you would put an offer in on a new home that obligates you to purchase it only if someone else agrees to purchase your home. This is a great choice for someone who has a home to sell because there’s very little risk to the buyer. If the buyer fails to purchase your home, then you reserve the right to go back on the market if there’s still time in the contingency period or you can back out of your contract as well. The drawback here is that selling a home contingent transfers the risk to the home seller, and most home sellers do not want to assume that risk on behalf of their buyer. This is especially true if you are trying to sell your home in a highly competitive market. Put yourself in the sellers shoes – if you had multiple offers on your home, five were contingent, but one of them writes a non-contingent offer wouldn’t the non-contingent offer be more appealing to you? Most home sellers want a sure-fire deal, and contingency doesn’t fit that bill in a hot market. For this reason some buyer will make every attempt to write an offer on their new home that is non-contingent.
#2 – Own Both Homes:
This is a viable option if you are in a position to carry two mortgages. In this case you would get a mortgage for the new home, and wait to move out of your current home until you are ready. This process is helpful if you want to turn your old home into an investment property and you are planning to rent it out after you move into your new home. It is also helpful if your new home needs major renovations and you do not want to live in the home while they are being completed. The one drawback to this process is that you cannot apply the sale of the first home onto the second. This means you will need to be approved for a second mortgage – while you’re still paying on the first one. You will also need cash for the down payment and closing costs on the second home.
#3 – Rent A Home:
There are two ways to do this – rent a random home or ask the buyers for rent back of your current home. If you opt to rent a random home this is pretty easy. You would sell your first home then find a home to rent until you find a new home to purchase. There are a couple of drawbacks. It can be a hassle to move multiple times in a year. You could incur heavy storage fees or pet boarding fees if you house things temporarily. Also you may be obligated to a long lease if you find your new home earlier than you anticipated. The other option is to ask for rent back of the home you are selling. In this option you would stay in your current home after it sells by renting it back from the buyers. You would get all of the proceeds from the sale of your home, which gives you both time and money to purchase a new home. The drawback here is that it transfers the risk to the buyer, and most buyers are hesitant to take on the risk of renting their new home and prolonging their move in date.
#4 – Close Non-Contingent:
This is a risker option than the other three but it can still be a viable one for some people. In this case you would purchase the second home without being able to break the contract if you fail to sell the home you are currently in. In this case the home buyer assumes all of the risk. However, in a highly competitive market it may be the only way to make your offer stand out.
As you can see buying a home when you still have a home to sell can be a tricky process. Sometimes there are transactions with 5 (or more)families buying and selling contingent. This creates a long string of dominos and if one falls then all of the others do too. So, orchestrating something like this is an art form and you need a good real estate agent who can guide you through the process, and that’s where I come in. My job is to listen to you and help you way the pros and cons of each option and provide you with a list of vendor partners who can walk you through all of the different options available financially to help you purchase that new home, contingent or not.
If you are thinking about making a move please message me I would love to help you through the process. No pressure or sales tactics, just the help and guidance you need!