About a third of our clients are buying and selling at the same time, or back-to-back. Which to do first, and how do you leverage the equity in your current home?
We think through critical questions to clarify your best scenario within a competitive market––paying attention to your cash on hand and financing options––and aiming to have you move only once. Where possible, we guide our clients to buy first.
Selling first, while workable, can be far less predictable in a market with very few homes for sale.
BUYING FIRST
Buying your new home first is optimal––if you’re able to do so without making the sale of your current home a condition (or contingency) of your new purchase.
The upsides:
- If we can position you to buy without a home-sale contingency, you can compete on par with other unencumbered buyers in the fast-moving, low-inventory market.
- You can secure a new home before opening up your current property to an overeager buying market.
- You’ll sell your home on your terms, when you’re truly ready to move.
- You’ll move only once, because we can time your sale to close after you’ve comfortably set up your new home.
The challenges:
- If you need to purchase with a mortgage, will your lender approve you to carry both mortgages at once, even temporarily? (That is, will the lender agree to ignore your debt on the current home?) We can explore the factors that make that workable.
- Strategies can include: showing sufficient income and/or assets, getting a co-signer, or even getting a rental agreement for your current home.
- Do you have sufficient cash available for the down payment (and closing costs) for the new purchase, which you can replenish after the sale of your current home?
- Strategies can include: refinancing to get cash out, getting an equity line of credit, or borrowing short-term from your investments or family.
Timing considerations:
To limit the length of time you’re carrying the combined costs of the two properties, we can have your home photographed, staged and ready to launch as soon as you’ve completed negotiations for your new purchase. (And if you’d like to move right away, we can prep you on what furnishings to leave behind to stage your home for photos and showings.)
SELLING FIRST
Or at least list your current home first and choose a flexible buyer who can allow you time to find your new home and get it to the closing table.
The upsides:
- If you don’t otherwise have sufficient purchase funds on hand, you’ll free up the equity from your sale as cash toward a new purchase.
- If a lender can’t otherwise approve you to purchase while carrying an existing mortgage, you can remove that debt hurdle.
- As a buyer without a contingency to sell a current property, you can then compete on par with other unencumbered buyers in the fast-moving market.
The challenges of possibly being in limbo:
- If you complete the sale first, what are your options for short-term living while you search for a new home?
- If you list your home with the condition that you’ll only close that sale once you’ve found a new home, to what extent does that home-purchase contingency limit your pool of potential buyers?
- What concessions might you need to make for a buyer to wait? What if you don’t find a home in that time frame?
- You may want to make sure contractually that you only close on your sale once you’re certain that you’ll be able to immediately close on your purchase.
Strategies around timing when selling first:
- We can aim to secure a buyer who will give you a flexible closing time frame––either a far out closing date, or a quick closing combined with a use and occupancy agreement that allows you to stay in your current home for an extended period after the closing.
- To attract a buyer who can wait out your search with you, it’s best to launch your listing early in the season––ideally pre-spring––to land a buyer who has the flexibility to wait.
If you’re thinking about buying and selling this year, get in touch! Together we can figure out a path forward that works best for your particular needs.
