Buying and Selling at the same time? It can be tricky.
This is probably one of the most common set of questions we get and rightfully so as may times selling your home is a contingency on the purchase of your new home. There are many moving parts to selling a home as well as many to buying a home, so balancing both in a situation where the the timing is crucial to both outcomes can be stressful. Simply overlooking one small detail, can throw off both transactions and upset your potential buyer and the seller of your new home. I came across this article from one of our friends Gary Palmer who owns a real estate agency in Charlottesville, VA. Gary writes a good post covering the multiple ways to handle a simultaneous buy and sell. Here is a quick summary from his site on on the three different scenarios.
-Selling your current home first-
from Gary: "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 rental – before beginning the search to buy another one. Investigate the prices of houses in your area; to sell high and buy low you need a clear comparison of how much houses are going for in your town. Your agent can help you with this by providing a report of comparables."
I agree with this assessment as this is definitely the safest route to take when assuming the best and worst case scenarios. If you work with a skilled agent, they should be able to give you a good idea on what your home will list for so you are aware of the equity you will have to go towards the purchase of a new home. If you find a buyer who is not in a rush to move, you can often negotiate a short term rental where you pay the new owner of your home a monthly amount to rent back your home after the transaction. This can give you more time to move and select your new home.
-Buying another home first-
from Gary: "To alleviate stress that comes with relocating to a hotel or a temporary rental house, buying another home as you prepare to sell your current one is the best option. This is especially true in the case of a buyer’s real estate market. In your offer, you can ask the seller to make your purchase contract contingent upon selling your home. Sellers will not always agree to these terms, and it is in these cases that you may need to go for a second mortgage."
This option requires a little more maneuvering as its possible you may have to carry two mortgages (your existing home and your closing on your new home). There is also additional risks to consider like the event that your home doesn't sell right away. Are you prepared to pay two mortgages? Should you consider a short term renter? This is really a situation where it's crucial to have an EXPERIENCED AGENT IN YOUR CORNER who has prepared you for the "what if" scenarios. If a long sales cycle of your home does occur, your agent should have prepared an analysis for the potential for a short term rental.
-Buying and Selling at the same time-
from Gary: "Buying and selling simultaneously is tricky, multi-faceted and perhaps the best plan of all for a move-up buyer. You must put all the requirements, including all financing and legal documents, on the table for this plan to close without any hurdles. To arrange the required finances for this plan, consider bridge financing options."
This is a very common approach, but one that requires a GREAT TEAM of people who have fiduciary responsibilities to you. Not only is a good agent necessary to manage the contracts and contingencies, but you need to have a good mortgage broker managing the transaction as often times you will need whats called a bridge loan (we highly recommend Rick Gilbert at http://www.ratepromortgage.com/ in situations like this).
If you are thinking of buying and selling at the same time, I highly recommend a sit down consultation to be clear on expectations. Feel free to reach out to me via the content form to schedule a time or email me at firstname.lastname@example.org
Find the full article here: https://www.towncville.com/selling-a-home/selling-purchasing-comes-first/