This situation happens more often than anyone realizes – and, especially, if you are selling a house in one city and buying in another, it can get even trickier trying to make sure everyone who needs the proper paperwork and funds does, in fact, receive everything in a timely fashion.
Although lenders are hard at work and deals are closing rapidly, there’s no guarantee that your new home will close at the same time as your old one. Selling and buying at the same time involves many balls in the air, but it is doable. Below are the three options available to a buyer in this market:
1. Sell first, then buy
If you can financially handle this, then this is perhaps the safest course of action, but you also have to deal with finding a place to live temporarily and storing your household items if you can’t find a new house right away. If you have identified a new home, but can’t close on it right away then there is the possibility of a rent-back deal with your home’s new owner. The advantage of this is that you know exactly how much you can spend on a new home, and you don’t have to worry about temporary financing. Also, without having to worry about losing another home while you wait to sell yours, you’ll be less tempted to drop the price or to take the first offer that is below the asking price. The disadvantage is that it is a disruptive experience, with potentially multiple moves, and you could be displaced for a while if you can’t find the perfect new home.
2. Buy first, then sell
This strategy cuts down on this disruption. You can move into your new place at your own pace and then take time to prepare your home for sale. The major disadvantage is that, depending on how fast your old home sells, you could be shouldering the burden of two mortgages. You’re also responsible for maintenance and security on the vacant home. This works best, however, if your first home is already paid off.
A variation of this plan is to buy a new home with the plan to rent out the old one for a year. This allows you some time with money coming in, but being a landlord comes with its own stresses and responsibilities as you may need to repair or renovate the home after it has served as a rental.
3. Buy and sell simultaneously
To execute this plan, you need to prepare for all contingencies and to know that if your timing is off, you will face one of the two scenarios listed above. The trickiest bit can be timing the financial end of things.
One option is bridge financing, which allows you to own two homes for a short amount of time. Be sure to ask your Charlottesville Solutions agent for more details as it can be complicated. In essence, you are getting a short-term home-equity loan on your present house and using it as a down payment on your new house. You then repay the loan when you sell your first home.
If possible, try to schedule the closing date on the sale of your old home after the closing date on the home you buy. In this way, you can stay in your present home until you move into your new home. Otherwise, you can attempt to negotiate a rent-back arrangement.
Sometimes it is impossible to plan for life’s adventures as a new job or other situation can crop up and you need to move right away. But, if you can plan, then your Charlottesville Solutions agent will be able to advise which route is best, depending on the local market, your financial stability, as well as your tolerance for taking a chance and dealing with a lot of stress in your life.