Recently, I asked you to send me your questions about buying and selling real estate. Ale asked about the pros and cons of selling your current house before buying the next one. He also asked about doing a rent-back.
First of all, if you have a house and want to buy another one, selling your current home first is a great way to go. You’ll have time to clean up your house and put it on the market. Plus, once your home sells, you will have enough money in your pocket to purchase another home. Since you are all ready to go, purchasing your next home will go a lot smoother.
Although it is more difficult to buy a new home before selling your current one, it is doable. There are a few different options, but you should always make sure to talk to a lender first to see which one makes the most sense for you financially.
1. Make a contingent offer. Find a house that’s been sitting on the market for a little while (in our market, that means two weeks) and make your offer contingent on the sale of your current house. This can be a difficult transaction, but it can be done.
2. Create a long settlement period. When you buy the new house, ask to close in 90 days. During that 90-day period, get your house on the market. The way our current market has been going, your home will likely sell in two weeks or 30 days, leaving you ready to close on day 90.
3. Look at different loan options. Again, talk to your lender to figure out which of these options is best for you. You may be able to get a bridge loan or set up a line of credit based on your home equity. You could even refinance your current house so that you can purchase the next house.
Finally, Ale also asked about a rent-back. If you sell your house but need to stay in it for a couple of weeks before you move, you can rent it back from the person you sold it to. Rent-backs are very common; they often make the settlement a lot easier on the buyer and the seller. Rent-backs do not hurt the value of the home, either — they are just part of the negotiation.
Next time, we’ll answer Elizabeth’s question about the challenge of needing the equity in your current home for your next property. Meanwhile, if you have any other questions about buying and selling a home at the same time, give me a call or send me an email. I would be happy to help you!