Buying and selling a home at the same time can be overwhelming. The logistics of packing, storage and moving are difficult enough, not to mention staging your house for showings. Combine all that stress with the time and energy required to find and purchase a new home, and it’s no wonder that people feel lost in the process, before they even start.
If you’ve built up equity in your current house, it can go a long way towards a new down payment. But upgrading into a better home, more land, a convenient location, or a desirable neighborhood can also improve your family’s quality of life.
Below are some approaches for you to consider if you currently own a home, and are thinking about moving in the future. Note: In a hot seller’s market like this, it is VERY difficult to get an offer accepted on another home if it’s contingent on selling yours first.
Options to BUY a New Home First
There are obvious advantages to buying another home prior to selling your existing house. This gives you time to find just the right home to purchase, and you only have to move once. Here are two ways to go about doing this:
- Secure a bridge loan or home equity line of credit (HELOC) to cover the time interval between buying one house and selling another. This gives you more negotiating power, but it introduces some risk and uncertainty in your cash flow. A lender can tell if if you qualify and can afford this approach. If your home doesn’t sell quickly, you could be paying two mortgages for a while. And it can be harder to qualify for the new mortgage, since your debt to income ratios will be higher. So not everyone will qualify.
- Find the right home, and make an offer contingent upon the sale of your current house. This is a great situation for you, but it weakens your negotiating power. Sellers may not accept your offer, because there’s a risk that the transaction could fall through. And, depending on the market, the pressure to sell quickly (in order to close on your new home) may result in selling your home for less than you intended. This approach is not usually successful in a seller’s market.
Options to SELL Your House First
Often, buying a house first isn’t feasible. If you aren’t certain your house will sell quickly, or if you have low equity in your home, you probably need to sell first. It’s easier to get a new mortgage with this approach, and you’ll know exactly how much money you have to work with after you sell your home. Here are two common approaches:
- Put your house on the market, sell it, and move into temporary housing. This puts you in a great negotiating position in buying a new home. But the double move can be stressful and inconvenient, and you may need to move your stuff into a storage facility. A trailer on a friend’s property is another idea, especially when rental properties are hard to find. Short-term living arrangements may be scarce or costly, so plan ahead to mitigate these risks.
- Put your house on the market, get an offer, and look for a new house right away. This puts a lot of pressure on you to find a new home quickly. You’re taking a risk, because the right house for you may not be on the market at that time. As a seller, there’s also a chance the transaction could fall through before closing (if the buyer defaults). This could jeopardize the contract on your new home purchase if you can’t afford to complete the deal.
- Have you considered keeping this house as part of your investment plan? That’s something you can explore, instead of selling, to build your portfolio.
- In some circumstances, it may be possible to negotiate the closing date or propose leasing options when the contract dates for the buyer and seller don’t match up.
As a general principle, it may make sense to buy first in a seller’s market (which describes Kitsap County presently), and sell first in a buyer’s market. But my job is to provide you with the information you need to make the best decision for you and your family.
If you’re thinking of buying and selling a home in Kitsap County, call or text me at 360-979-6411 to get more information about your options. I’m here to help you!