Buying and selling a home in succession can feel challenging.
And the prospect of carrying two mortgages is certainly daunting. But with the right preparations, planning, and guidance from a professional real estate agent like me, you can minimize the risks and set yourself up for success with both transactions.
A Tale of Two Transactions
Recently, I helped my clients purchase a new home and sell their condo in less than two months.
My market experience combined with the right planning and preparation made the difference in achieving this exceptional result.
Click here to read their story.
Understanding the Market and Your Home’s Value
As a first step, it’s important to understand current demand for homes, both as a buyer and seller. Demand differs vastly between neighborhoods and property types. You may be looking for a new home in a neighborhood that is in high demand with limited inventory while there might be less demand for the type of property you currently own.
In addition it’s important to understand the impact of market forces on both transactions. To best assess your options, it’s vital to work with an agent who is well versed in representing buyers and sellers in your market. Further, if you are looking to purchase outside of San Francisco or California, you’ll need to get a solid understanding of those market dynamics.
Getting a clear picture of your home’s value is crucial. It’s not advisable to rely on automated value models like Zestimates (for more on that, read my blog post on AVMs). I can help you understand the worst case and best case scenarios for selling your current home. A realistic assessment informed by the current market is the best way to plan a budget for the purchase of your new home.
Decide on Your Strategy
In most situations, selling your existing home before you buy a new home is the only choice. In other cases, you may want to buy a new home before selling your existing property. The path you choose depends on your situation. My job is to listen, understand your objectives, and offer guidance in helping you determine the best way forward and a timeline that meets your needs.
Sell First, Then Buy
Selling your home first may be the only option when you need funds for a down payment on a new home. Once your sale closes, you will know exactly what your budget will be for your purchase.
The downside in this case is that you will likely need to move out of your home to sell it and the timeframe for selling could be longer than anticipated. This can add extra costs in terms of moving twice, paying for temporary housing, and storage.
There are some strategies to address these challenges. One is a rent-back provision, which is an agreement with the buyers of your home that allows you to stay in the home after the sale closes and while you look for a new property.
Buy First, Then Sell
When you purchase a home before selling you only have to move once and you are less pressured when making your home purchase. However, with this approach, you will need to have money in place for the down payment as well as lending pre-approval. On the flip side, you may then feel rushed with your home sale, particularly if it’s a financial stretch to take on two mortgages for any period of time.
Whatever Your Path, Stay the Course
Remember that before we start the process we will talk about your goals, budget, timeline, and put a plan into place. The upfront work we do together to plan and secure your financing will help to alleviate fears, minimize stress, and keep you focused on achieving your objectives.
Finalize Your Financing
After you have a sense of the market and your home’s value, you need to assess your finances. A conversation with your mortgage lender and financial planner is a good place to start. They can give you a sense of what options you have based on your financial situation, including bridge loans, home equity lines of credit, or other financing strategies.
You will also need to get approved for a loan for your new home purchase, taking into account your equity in your current home. Equity is the amount of money you will have after you sell your home for its current market value and deduct the balance due on your mortgage as well as costs to sell.
Understanding Your Equity and Bridging the Gap
If you have additional resources to purchase a home without relying on the equity in your current home, you don’t have to worry. But if you need the proceeds from your home sale to help you purchase your new home, these funds aren’t available until the sale of your home closes.
In this situation, you can discuss a bridge loan with your lender. Bridge loans literally bridge this gap in funding, providing money for the down payment and deposit on your new home. You repay the loan when you close on your current home and those funds are released to you from escrow.
Focus on Factors You Can Control
As with all real estate transactions, your timing and your goals are the most important factors to consider, and many factors may be out of your hands. For example, if you are being relocated for a job or life change right away, you may not have the luxury of deciding which approach you prefer. I can help you understand and maintain focus on what you can control. And making informed decisions with your goals top of mind will ultimately set you up for a smoother process.
Planning for Your Success
Ultimately, achieving success when selling and buying property boils down to planning. Doing the work to create a realistic plan will help to narrow your focus and minimize your stress. With a solid plan, you can sell your current property and embark on your new home search with confidence.
As an experienced real estate agent, my job is to provide guidance to help you make the most informed decisions you can, no matter what path you choose. With market insights, strategic pricing, straightforward communication, and negotiation skills, I can help you reduce the risks and maximize your return with both transactions.
