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Selling One, Buying Another
In a perfect world, you sell your old home and buy the new one on the same day. Given that things rarely turn out perfectly, here are some things to talk to your realtor about in regards to negotiating the sale of one house with the purchase of another.
Time it right
Fall and spring are the best times for homes to move and you want to consider the season of the year when buying and selling. And if the closing dates aren’t going to coincide, a gap – rather than two mortgages – is the better. It’s easier and usually cheaper to find temporary housing than juggle two mortgages.
Selling First
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Selling your home before buying a new one minimizes financial hazards. Even if you have to find temporary housing, it’s generally cheaper than two mortgages.
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Know what your current home is worth. That way you’ll have a good idea how the sale of your home will effect your purchasing power on the new one. This will help keep you from over extending your mortgage abilities. Make sure you are using a realtor that will list your home at a realistic, not inflated price. Remember, during a slower market is not the time to "test" what you can get for your home. Have realtors make comparative market analyses for your home. Being realistic allows you to sell your home quicker and know exactly how much you have to buy the next home with.
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Get pre-approved on a loan for the new home. Not only do you know what you can afford for the new home, but this allows your realtor strength in negotiating the price and closing dates of your contract.
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Until most of your contingencies have been met, wait to put an offer on a new house. You don’t want to be left holding the bag, or in this case, the house. Work out the specific timing with your realtor. There are many dates to consider in a contract and how it all affects your money and your move. Dates and timing are crucial in contract writing.
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If you’re ready to accept an offer on your home, but haven’t found the right new home, negotiate a long escrow or a sale/lease back. This will give you more time to look for the new home. Otherwise, look for temporary housing.
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When you get an acceptable offer, make sure you have a preapproval letter. (There is a difference between pre-qualification and pre-approval.) You don’t want any surprises that are going to delay things.
Buying First
It happens. You’re only thinking of buying, and suddenly the right home shows up. Now you have to sell your old home quickly. Here are some tips on making things work in your favor:
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Negotiating a long escrow on this side of the sale works, too. You can also make the purchase contingent on your house selling. This will work better in a slow market, but it’s worth a try in any market. You never know what may also work best for the seller of your new home.
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I know this seems obvious, but try and schedule the closing date of your current home prior to the closing on your new home. Temporary housing is generally a better situation than two mortgages. As an alternative, you can work it out with your realtor to have a simultaneous closing.
Same Market or Across Country
Generally, if you’re buying and selling in the same market, you can negotiate closing dates to work for you. But when you’re dealing with a cross country move, it’s a lot harder. A real estate professional really comes in handy at this point. Legal documents can be faxed or sent via overnight courier and your focus won’t be stretched to the limit. You may end up renting one home or the other, or have to consider a bridge loan. But with someone local in the market on your side, it will hopefully be less stressful.
Show Me the Money
Make sure you have a tight hold on, and a clear understanding of, your financial situation. Cash reserves are always helpful, but never more so than during the purchase of a home. Two to three months is the recommended reserve, but if you don’t have it, this is where the bridge loan comes in handy. Some lenders are more inclined to make a loan if it’s for the purchase of a home. If you’re a smart shopper/seller, you’ll accept an offer from someone who’s flexible about move-in dates. It can save you money in the long run. Too many moves with storage costs can quickly eat up any profit you may have made in the transaction.
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