Monday, October 13, 2014

Tips For Buying and Selling A Home at the Same Time

And you thought buying or selling a home was scary. Either one can be, of course, but there’s nothing like doing both at once to foster a flurry of “what ifs.” What if I buy a new house, but my old one doesn’t sell? What if I sell my old house, but can’t find a new one? And what if I try to do both at once and end up going completely crazy in the process? Full Article  

Don’t worry, you won’t, as long as you take the time to think things through. Depending on your particular situation, it may make more sense to buy first, then sell — or just the opposite. Either way, here are some of the factors to consider:

Buy First, Then Sell
  • Can search for new home without pressure
  • No need to find interim housing
  • Risk of double mortgage payments
  • Equity from current home unknown
Sell First, Then Buy
  • Equity is immediately available
  • No double mortgage payments
  • Risk of having to find interim housing
  • Pressure to buy can lead to rash decisions

Clean It Up

Clearly, buying and selling concurrently comes with its own brand of stress, but with a little pre-planning you can keep it under control. Simply put, you should get as much done to your old house before you even start looking for your new one. At a minimum:
  • Get rid of stuff. You don’t want to be hauling junk to the dump while the clock is ticking.
  • Fix what you can. If necessary, hire an inspector to determine what needs doing and get it done. Quibbling with potential buyers over who’s going to pay for what is counter-productive.
  • Disclose what you don’t — fix, that is. If you don’t want to take on a major repair, be sure to disclose the problem to the buyer. It may be better to accept a lower offer than to have the deal fall apart. 

Tools of the Trade

Regardless of the route you choose, you can ease the process in others ways, too. One is through a bridge loan, a short-term loan that “bridges” the gap between buying your new house and selling your current one. (Watch out, though: Bridge loans often carry high fees and interest rates.) Other options include taking out a home equity loan or borrowing against a 401(k).

You can also structure your deals to include contingency clauses, in which you agree to sell your current home contingent on purchasing your new one and/or agree to buy your new home contingent on selling your old one. Just be aware that most sellers prefer contingency-free offers: If your offer is contingent on selling your current home and a competing offer has no such constraints, many sellers will go for the free-and-clear sale.

The Reality of Rent-backs

If you’ve sold your current home but can’t move into your new one (or haven’t even found it yet), you may be able to negotiate a rent-back with the buyer. In a nutshell, that means you can stay in “your” home as a tenant who pays rent to the new owners. If the buyer is amenable, you’ll not only have the proceeds from the sale, but also more time to plan your next step.

The problem, of course, is that the buyer calls the shots. They’ll probably want you to cover their mortgage payment and other costs, which, assuming your house has appreciated, are probably quite a bit higher than you’re used to paying. Add in the utilities, renter’s insurance, and other expenses, and it may make more sense to find a rental apartment — or redouble your efforts to find your new home.

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