Managing a sale and purchase together
For most home owners,
deciding to sell your house is usually determined by the need
for a new home. Whether it's because your family is growing
or you have a new job, or because you can afford more, when
you sell you'll need a new place to call home.
Sell Your Old Home First:
For many of us, it is easy to begin our search for a new home
before we've even sold the old one. Don't. It is usually best
to sell your existing home before you purchase the next. There
are always exceptions to the rule, but by selling your home
first, you save yourself headaches and avoid financial difficulties.
Why Sell First? Can you really afford
to carry two mortgages? For most of us, it's not realistic.
Not to mention, most lenders will require that you sell your
existing home before they will extend you the loan on the
new home. Once you've secured the sale of your home, you'll
know how much you have for the next down payment, how much
you're lender is willing to loan you, etc. Financially it
If you need to sell your existing home, you are not in a very
good position for bargaining when it comes to purchasing a
new home. Most sellers won't be willing to wait an undetermined
amount of time for you to sell your old house; they would
prefer to accept an offer from a buyer who has no strings
The fear of selling your home before
you have found a new home can be unsettling. But in most cases
you can write your sales contract with a later possession
date or even lease your old home from the new buyer for a
period of time. This will free you up to find the right place
Consider Building: When
you build a home, the builder generally needs 5-8 months to
complete your home. And most builders are willing to accept
a contingency agreement, giving you time to sell your old
house. This may be a better option than buying a preowned
home, if you have an existing house to sell.
Next Home Before You Sell: Although our best advice
is to sell your home first, some home owners find themselves
trying to juggle a sale and purchase at the same time. If
you are in this situation, here are some tips on how to successfully
manage a sale and purchase at the same time.
1. Find the Right Professional to Represent
When you are in the position of buying before you sell, it
is extremely important that you have someone on your side,
helping you through both transactions. You should find a professional
who is experienced in dealing with dual transactions, writing
contract contingencies, and working with lenders. The Realtor
you choose will have a major impact on how smoothly your transactions
2. Prepare Your Home For Sale
Before you even begin to search for that next home, make sure
that your home is ready to be put on the market. Any repairs
that need to be made should be completed. If you need to paint,
do it. If you are going to be successful in juggling both
a sale and a purchase you will have to be ready to list your
3. Know the Value of Your Existing
In order to have a good idea of what your home will sell for,
you need to have your Realtor conduct a Comparative Market
Analysis. This will give you an estimated value. For a more
exacting figure, think about having your home appraised. Once
you know about how much your home will sell for, you will
have an idea of how much you can put down on the new home.
4. Get Pre-Approved
Using the numbers estimated in your CMA or appraisal, approach
your lender and have them pre-approve you based on the sale
of your home. If you are able to get financing without selling
your home, you will have more flexibility, but in most cases,
your loan will be contingent on the sale of your existing
home. In some instances, you may be able to secure interim
financing, or a bridge loan, in order to buy the new home.
This "bridge" loan is usually made against the equity
in your current home and would be repaid to the lender upon
the sale of your existing home. Once you have secured your
financing, you can begin your home search.
5. Structure Your Offer to Buy
Once you've found the home you wish to buy, it's time to make
an offer. When you make your offer your real estate professional
will help you structure the contract to better suit your situation.
You should negotiate a long escrow period, or make the purchase
contingent on the sale of your current home. This contingency
may make your offer less attractive to the sellers, but if
it is a sound offer, they may be willing to accept the terms.
Your Realtor will be well versed in handling these negotiations
as well as the structure of the contract.
6. Focus on Selling Your Home
Once you have a contract in place, it's time to get moving
on the sale of your home. Sign the listing agreement with
your Realtor. This will free them up to list the property
with their local MLS, put the property on their website and
begin to market the property. Since you've already spent the
time and energy getting the home ready to sell, you should
be able to hold open houses right away. Also, if you're Realtor
is savvy, they have already begun to line up potential buyers
even before the home goes on the market.
7. Accepting the Right Offer
Because you have a contract on a new home, you need to be
careful about accepting offers on your existing home. If you
receive an offer which you want to accept, verify the buyer's
creditworthiness, avoid any and all contingencies which cannot
easily be cleared, and try to set a quick closing date. By
accepting a contract which has few hurdles to cross, you better
your chances of quickly closing on both contracts and moving
into your new home.
Once you have both contracts in place, try to set the closing
schedules to coincide with one another. This way you will
not have to find interim housing or lease back your existing
home in order to have a place to live. If you were unable
to sell your existing home, but still have the ability to
purchase the new home, go ahead and close on that contract.
Consider lowering the price of your old home or take it off
the market until the following selling season when the market
is stronger. Your Realtor will be instrumental in providing
guidance through the closing and should have some helpful
advice on how to proceed on the sale of your old home.