While only about 60% of people own their own home, most everyone is still on the search for their dream home. If you currently own your home, buying a new one while selling your old one is a delicate juggling act. If you're unaware what to know when buying a house while yours is on the market, there are some simple ways to ensure the transaction goes as planned.
Here are five tips to make things easier.
When you want to buy while your house is still on the market, you'll have to do a little bit of scheming. Thankfully this is a common enough scenario that the market is prepared for it.
If you want to find a new home before you put your old one on the market, consider making an offer with a contingency plan. There's a common "sale and settlement" contingency that allows sellers to set up a buy based on the sale of their current home.
Finding a house that you love takes time. If you haven't been on the market for a while, you need to take time to weigh your pros and cons. There might not be anything worth moving into.
Once you find one, submit your offer with this contingency, meaning that if you can sell your home, you'll buy that other one. This doesn't eliminate a seller's ability to take other offers but if the market is healthy, this should work out.
You may have to submit an offer higher than you may have intended in order to stay in their good graces.
If you're in a buyer's market, this is the way to go. If you're in a seller's market, you could get undercut. Take the temperature of the market and have a serious conversation with the seller of your next home. If they like and trust you, they'll help facilitate the transaction by placing it on hold unless an undeniably great offer comes in.
Some sellers are more confident than others. If you're in a hot market looking to move to a cooler one for the price and the location, you could be in a great position. Confident sellers, positive they're going to sell their home quickly, can request an extended closing.
In this scenario, your home closing will be longer than the typical window, less than 45 days. You'll get the opportunity to sell the home that you're in and shift the equity over to the next place.
Ultimately, sellers seek out the best deal. If you can offer the best deal, this scenario will work out in your favor.
Much like contingency offers, you're going to need to be comfortably seated in a hot buyer's market. In a seller's market, getting a seller to do anything that's in your favor will cause you to lose out.
If you've got a significant amount in liquid assets or in savings, you don't need to worry about whether or not your home sells. You have the power to do what you want.
The simplest way to get this transaction to run is to pay your own down payment and leave the rest to the market. Once you've paid your down payment, the seller of your new home is aware that you're serious about the transaction.
They'll be happy to wait for your current home to sell. So long as they get paid, they're not going to worry about how long the rest of the process takes.
What you must consider is whether or not your savings is sufficient to cover the rest of the costs. There will be taxes, closing costs, and moving expenses to worry about. Along with inspections and any repairs that you'll need to perform, you could end up spending more than you had planned.
Don't deplete your savings to buy a new home. Patience will keep you from having to recover your hard-earned savings later on.
A bridge loan is a short-term loan from a lender or even from a seller to help facilitate a sale. This is a common loan offered when you're buying a home. This allows you to purchase the home you're looking for and get the ball rolling, despite whether or not your home has sold.
Talk to a banker about this early enough in the process to take advantage of it. Not every bank offers the potential for bridge loans. Depending on the seller, they might not feel comfortable going this route.
Qualifying for a bridge loan requires a great credit score. If you've struggled to qualify for loans in the past, this loan might be hard to come by.
If you have your down payment covered but you're not sure what to do while your current house is on the market, you could try renting it out. If you've got a desirable property in a good location, finding a renter shouldn't be difficult.
The rent that you earn allows you to cover mortgage payments. The need to sell will subside, making it easier to get into the home that you'd prefer.
While becoming a landlord it might not be your idea of fun, it's a great way to earn extra income for repairs. Maintaining one property while you build wealth with a second ensures your retirement is much more comfortable.
If you already know what to know when buying a house, buying while selling at the same time is a whole different beast. Without the right preparation, you're going to be trying to do more than walk and chew gum at the same time. Thankfully there are tools and methods for making the sale as easy as possible.
If you have more questions about how to manage this balancing act, contact us today.