Are you looking to buy a new house, but still need to sell your current home first? It might seem tricky—or risky—to do both at the same time, but with the right guidance, it’s definitely doable. On this episode of Sac N Gaged, I’m going to share a special Gage Group Home Buying Tip on what not to do if you’re faced with buying and selling a home at the same time. We’ll let you in on 2 secret strategies that will help you find your home before someone else snags it, all while avoiding dangerous pitfalls that could leave you homeless.
In order to buy and sell simultaneously, you’re going to need careful planning; the smallest error or bump in the road will be extremely frustrating. Many real estate rules and regulations require buyers and sellers to adhere to certain timelines, and you’ll want to know what they are so you don’t run into any roadblocks. Follow these 7 steps and you’ll have the best chance of success!
Step 1: What Do You Qualify For?
Before you go ahead with selling your home before you buy, confirm with your mortgage lender if this is the right step. Do you need to sell in order to obtain financing? If you’re able to qualify to purchase a new home without selling, you’ll give yourself more flexibility and better options.
The person buying your house will need to obtain financing that will allow them to close on your home. On the reverse side, you won’t be able to close on the sale of your new home until they do. If anything goes wrong with the transaction, it will affect your ability to move forward towards purchasing your new dream house and could put a wrench in your plans.
Think of what needs to happen if you sell your first home and fully close, but aren’t yet in your new home:
- More than likely, all of your possessions will need to be out of the house for the new buyer to move in
- Where will you put all of your stuff in between?
- Do you want to sell your existing house in the morning, and close on the new one in the afternoon?
- Will you need temporary housing or storage?
If you don’t have to sell your home first, your transition will be much more comfortable. Tight timelines can be hectic and stressful, but if you find yourself in this situation, you’ll want to be as prepared as possible with all the information you need.
Step 2: Prepare A Net Sheet For Your Existing Home
A net sheet will help you determine your final profit after subtracting all of the closing costs on your home sale. Your real estate professional can create this sheet for you to give you an idea of what your home will realistically sell for. As opposed to online calculators and guesstimates, your agent can give you an honest analysis of what your house is really worth.
It might not always be what you want to hear, but remember: the market will dictate the price. A real estate agent, investor, or home seller is not going to be able to set the value of the home. Your agent’s estimated value of your property, considering all the closing costs, will give you an idea of how much you’ll gain from your house to put towards your next purchase.
This number will allow you to know what you can afford ahead of time and will help narrow down your home search.
Step 3: List Your Home For Sale
List your house with a true online marketing plan, including proper positioning, pictures, and video. You don’t need to aggressively look for homes to buy immediately since you’ll want to sell your existing home before purchasing the new one, but you can do your research online to get an idea of what you want. Don’t fall in love with a house before you can purchase it: when you see it sold to someone else, you’ll be unnecessarily disappointed.
Secret Strategy #1: Don’t worry about aggressively searching for your new home until you feel like an offer is coming in. A good agent will alert you when it’s time to get aggressive, usually once you’re getting 5-7 showings a week.
Another reason you don’t want to view properties too early has to do with contracts. If you try to buy another house when your current home in no under contract, you enter into a house to sell contingency. This means that your contract to purchase the new home is dependent on finding a buyer for your current property.
As a seller, it’s difficult to accept these types of offers when they don’t know how long it will take for you to get a buyer. What if your house is overpriced or can’t sell? Accepting an offer that includes a house to sell contingency would lessen your exposure on the market, and should only be taken if you receive an offer that’s too go to pass up.
EXAMPLE: Imagine that a seller receives an offer from a buyer that needs to sell their house first—but they’re not aware of that fact. They may verbally agree on a price of $400,000 until the buyer lets the seller know they need to sell their property first. This house to sell contingency can change everything, and the seller could easily counter back at $415,000 because of these additional terms. They may even reject the offer completely until you have a buyer—which leaves you open to losing the house you want to someone who’s ready to pay.
Since having a house to sell can affect your negotiation tactics, terms and pricing, it’s best to have your current house under contract before purchasing a new home. Again, this is not to say you can’t look around at all; it just means you’d ideally want to have your house under contract or be very close to finding a buyer before putting an offer in somewhere else.
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 and this will affect showings. This status change usually prompts buyers and their agents to overlook the property.
My recommendation? Don’t start looking for a house until after you receive an offer to purchase yours.
While a seller often won’t accept a house to sell contingency, they will accept a house to close contingency. This difference is that the house to close contingency means you already have a buyer, with the contract contingent on financing. This is a much more secure situation for a seller to consider, as opposed to you not having a buyer at all. You’re also more likely to get a better deal since you have better terms to offer.
Step 4: Your Offer Is Coming Soon
Your agent should know when you’re close to receiving an offer, usually when you’re showing 5-7 times per week. If you’re not showing at all, you may need to adjust your marketing or your price. Making a price change before you accumulate too much market time will probably be your best option.
Trust your agent’s opinion to know when to get aggressive with your home search. Remember that houses are always coming on and off the market, and what’s here today may be gone tomorrow.
Step 5: Accepting an Offer On Your House
Once you get a contract for the sale of your house, things will really start to happen. Try to negotiate a longer closing date with your buyer (ideally not sooner than 60 days), as this will help you accomplish two important things:
- You need to allow yourself time to buy a new home, which includes the complete process: house hunting, inspections, financing, and financing approval.
- Buyers need time to do their diligence on your house, which includes an inspection, so they understand everything 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.
Step 6: Find Your New House And Get The Contract Accepted!
Once your house clears its inspection, you’ll need 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.
Secret Strategy #2: 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.
If you have a temporary housing situation set up, you won’t need to close on the same day and your timing won’t be as crucial. If not, you’ll want an exact plan with your agent to make sure your appraisal is filed and gets into underwriting immediately—which is the process your loan goes through once your lender has all pertinent information.
You’ll also want to make sure your buyer’s lender is doing everything they need to do on their end to make sure your transaction doesn’t fall through. Their appraisal should be completed within the first 7-10 days after accepting the contract, and you’ll also want to make sure their underwriting is 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.
Doing all of this ensures that your buyer’s financing will be 100% approved before the closing date, making sure you have time to deal with any last-minute bumps in the road.
Step 7: Close And Close
There are many moving parts when buying a new home and selling your current property at the same time: both are big, important decisions that require careful planning, and both impact your daily life. Planning ahead and having a solid strategy helps you avoid headaches and unnecessary stress (though there will be some), and will help you get into your new home so you can start the next chapter of your life.
If you need more information or guidance, feel free to connect with us here at Gage Group Realty and we will be happy to guide you through your home buying and selling journey!