Tuesday, January 21, 2020 / by Marketing Dude
Do you want to buy a new house, but need to sell your current home first? If you’re feeling stuck in your housing situation, you’re not alone. The fact is, most Americans who own a home will probably find themselves in this position at some point in time. So if you find yourself needing to buy and sell a home simultaneously, then this blog is for you.
Planning is vital to this process because even small problems could have major consequences. If you don’t execute the timing of your closings properly, you could find yourself temporarily homeless. You want your move to be a positive change, and spending hundreds of dollars on hotel rooms because you planned poorly is not the best start.
To make sure your transition goes as smoothly as possible, I’ve created a step-by-step guide for buying a house and selling it at the same time. With the right preparation and proper timing, you’ll be settling in to your dream home before you know it.
Step 1: Find Out What You Qualify For
The first question you should as yourself is, Do I really need to sell before I buy? Finding the answer to that question is as simple as speaking with your mortgage lender. If you don’t need to sell in order to obtain financing, you’ll have less stress and a better position when making your next home purchase.
Think of it this way: the person buying your house needs to obtain their own financing in order to close on your house. In turn, you won’t be able to close on your new home until they close on theirs. If there are any hiccups with their side of the transaction, it will affect your upcoming purchase. With so many moving parts, there’s little room for error.
You should also think about what happens if your timing is off; what if you close on your first home but can’t get into your new home right away? You’ll then have to consider:
Moving all your stuff out of the house before the new buyer moves in
Where to store everything in the meantime
Timing your closing—will you want to sell your existing house in the morning, and close on the new one in the afternoon?
Finding temporary housing or storage if needed
Obviously, it’s to your benefit if you don’t have to sell first before you buy. So connect with a mortgage lender and make sure you know what you qualify for. If you do need to sell before you buy, the following steps will make sure you’re as prepared as possible. Your planning and timing will be crucial!
Step 2: Prepare A Net Sheet For Your Current Home
Your realtor can help you create a net sheet on your home sale, which will help you determine your final profit after you minus all closing costs. Getting a realistic idea of the value of your property will help you make the best decisions, instead of just using a generic online calculator that won’t be as accurate. Working with your agent, you’ll get an honest analysis of what your house is really worth—not just what you think it’s worth. Remember that the market will always dictate the value of your home. This amount cannot be changed by a real estate agent, an investor, or you. Trust the opinion of your agent, who knows the market best, and the market itself.
Having a breakdown of your net profit will give you the best idea of what you can afford before you shop. This will help you narrow down your home search and save you hours of internet browsing.
Step 3: List Your Home For Sale
Now it’s time to list your home for sale. This should include an online marketing plan with professional quality pictures and videos to showcase your property’s best features. Since you won’t be purchasing a new home until after you sell your current one, don’t worry about looking for a property right away. It’s okay to research online to get an idea of what you want, but don’t fall in love with a house just yet. If it sells before you have a chance to make an offer, you’ll be needlessly disappointed.
Your best bet is to wait until you feel like an offer is coming in to start getting aggressive in your home search. A good agent will let you know when it’s time, usually when you have 5-7 showings per week.
You also want to be aware of entering a house to sell contingency. This happens if you try to buy another house when your current home is not under contract. Your contract to purchase the new home will then be dependent on finding a buyer for your current one. This is not an ideal offer for a seller to accept. How long will it take you to get a buyer? What if your house is overpriced or doesn’t sell? Accepting an offer that includes a house to sell contingency would lessen your exposure on the market. These types of offers should only be taken if it’s too good to pass up.
Let’s consider an example to illustrate the point. Imagine that a seller receives an offer from a buyer that needs to sell their house first—but they’re unaware of that fact. They may verbally agree on a price of $400,000—until the buyer tells them they have to sell their current home first. This house to sell contingency could change everything. With the new information, the seller could easily counter back at $415,000 because of these additional terms. They might even reject the offer completely until the buyer is under contract—which leaves them open to losing the house they want to someone who’s ready to pay.
Having a house to sell contingency can strongly affect your negotiation tactics, terms, and pricing. If you can avoid it, it’s best to have your current house under contract before purchasing a new home.
PRO TIP: Sellers can show their homes to other buyers if they accept a house to sell contingency, but the status will change on the MLS. This status change usually prompts buyers and their agents to overlook the property, and it will affect showings.
If a seller won’t accept a house to sell contingency, they usually will accept a house to close contingency. This means you already have a buyer and the contract is only contingent on financing. A seller will be far more likely to consider this situation, as it offers more security than you not having a buyer at all. With better terms to offer, you’re also more likely to get a better deal.
Step 4: Prepare For Incoming Offers
When your property is being shown 5-7 times per week, your agent should know that you’re close to receiving an offer. This is when your agent should advise you to start aggressively searching for a home. Don’t forget that houses will always be coming on and off the market, so try not to stress if your timing doesn’t line up for you to make an offer. A new listing is bound to show up, and you’ll be able to find your dream home with a little bit of patience.
If you’re not getting many, chances are you may need to adjust your marketing or your price. A price change could be your best option before you accumulate too much market time and lose some of the buzz around your property.
Step 5: Accept an Offer On Your Home
Things will start moving quickly once you get a contract for the sale of your house. Try to negotiate a longer closing date with your buyer (ideally not sooner than 60 days). This will help you accomplish two important things:
It allows you time to complete the process of buying a new home. This includes house hunting, scheduling inspections, applying for financing, and getting that financing approved. 30-40 days from a contract acceptance should be enough time to get everything done, with a good 2-3 weeks allotted for house hunting.
It gives buyers the needed time to do their diligence on your house. This includes an inspection to make sure they know exactly what they’re buying.
If you live on a property with an HOA, you’ll also need to provide all condo association documents to clear any issues and make sure the property is in good status. Once all issues are cleared, you’ll want to be in full buying mode. If something is wrong with your home, the buyer can still cancel the contract—affecting your upcoming purchase.
Step 6: Find Your New House And Get The Contract Accepted!
After your house clears its inspection, it’s time to put your new home under contract. Aim to have your home purchase under contract no sooner than 35-40 days from your anticipated closing date.
PRO TIP: If you’re selling your existing house in the morning and closing on your new home in the afternoon, make sure your title company or real estate attorney provides the lender with everything they need to make sure the transaction goes smoothly.
Here is where your timing can be crucial. If you don’t have temporary housing set up, you’ll want an exact plan with your lender to make sure your appraisal is filed and gets into underwriting immediately. Your real estate agent should be proactive in making sure the lender has all the information they need to complete the process.
You also need to make sure your buyer’s lender is doing everything they need to do on their end so your transaction doesn’t fall through. Their appraisal should be completed within the first 7-10 days after accepting the contract, and their underwriting should be submitted shortly after the appraisal is complete. With a mortgage contingency in their contract, the buyer must secure financing by a specified date (or the mortgage contingency date). That date should be no later than 35-45 days from your acceptance of the sale.
Making sure all of these details are in place ensures that your buyer’s financing will be 100% approved before the closing date. This is vital to allowing you the necessary time to make sure you can deal with any last-minute hiccups. Your goal should be to eliminate as many “what-ifs” as possible.
Step 7: Close…And Close!
Coordination and planning are crucial when you’re buying a selling a house at the same time. While it’s not a stress-free process, having a solid strategy will help you avoid headaches and unnecessary issues. With the right team to help you along, you’ll be able to make a smooth transition.
If you’d like me to walk you through your specific situation of buying and selling at the same time, please feel free to reach out to me and I’d be happy to help!