If you’re like most people, you’re probably concerned about selling your house before having one lined up to buy.
You don’t want to sell your house first, not having somewhere to go.
In some cases you know you can’t buy another house, without selling the house you already own.
Ideally, you want to time the sale and closing of the house you have to sell, with the purchase of the house you’re moving to.
First, if your life situation is in such a way that you have to sell your current house in order to qualify for a loan on your new house, here are a few options:
1. Negotiate a contingency on the purchase of your new home.
This is the easiest of all the options. When you find a home you love, when your offer is being presented to the Seller, your agent will ask the Seller to accept a Contingency on the contract of your current property selling first. In some cases, if the Seller has had the house on the market for more than several months, they will be likely to accept this Contingency. The one exception to this option, is you have to have your current house listed first. Most Sellers want to see that your house is currently active on the market and being shown to buyers. You can have a Realtor that will do both for you. List your current house, and locate your future house. Also, your agent needs to convince the Sellers agent that your current listing of your house is priced correctly and shows well and that you, the Buyers are motivated. At any rate, if this is option is not working in the market you are currently in, and Sellers are not accepting this Contingency, then there are some other options.
2. You can rent your current property.
This will show your lender that you have your house financial responsibility being covered by a rental agreement and regular income payments for your expenses on the property. This will reduce your debt to income ratios to better qualify for a new loan. This can be timed in such a way, that as long as you have a lease to provide and dates of the lease to the lender, you may qualify for your new loan with the lender verifying all this information. The tenants can move in after you move out. If you already have the down payment and closing costs needed to purchase your new home, this might be an option. Then at a later date you can decide if you want to sell the house once your tenants move out.
3. Get a bridge loan.
These aren’t the easiest thing to find, but you might be able to find a bank who will lend you money without selling your home, or as long as you have a viable contract on your home. It could be a bridge loan. Or it could just be that the lender feels you can carry both mortgages for a short period of time.
Of course, you can do away with all of these concerns if you have enough cash on hand, or own your other house outright. But most people aren’t in that position.
Note: Don’t look into these options once you have your house under contract and have found one you want to buy. Do this before you even start the process. Look into different lenders and the options they may have for you. You might be happily surprised.
4. Qualifying for your new property
If you are in a financial position where you can qualify for a loan for your new purchase or you’re able to pay cash, then you have much more flexibility with your options. Start looking first for your new home. Once you find one, make your offer and set your closing date. Once you have a firm closing date, you can now make arrangements for your current property. Will you be selling the property? Will you want to rent it? If you decide you want to sell your property, this will be a good time to start the process of interviewing Realtors, and find one you want to work with. Your Realtor will have many suggestions. One of which, is to start decluttering the home and start a staging process. Houses show and sell much better that are somewhat staged. So if some of your current furniture is available this is a good purposes for it. Then within several weeks of getting the house ready, you can list it for sale or rent. You might get lucky with an immediate contract and will be able to close on the property shortly after you close on your current purchase. Another option, is to wait until you completely move out before listing it for sale. This way the home is vacant and can be shown at anytime.
Having any of these as your back-up plan can take the pressure off of you to just buy whatever house happens to be available and line up with your timing. It can buy you time to wait a bit for the perfect house, and take some of the pressure off when you are negotiating. If you are pressed for timing, you may be forced to pay a higher price for the house you are buying. So having a plan for where to stay or how to navigate through your selling and buying process is important to set ahead of time with your Realtor.
No matter what, don’t expect to just wing it and hope everything works out for the best.
Come up with your game plan beforehand.
And the best way to find what plan will work for you is to call your real estate agent, and work hand in hand with your agent from the get-go.
Real estate agents deal with these concerns day in and day out and can help you make the best decision and plan considering your wants, your needs, your situation, and the local market.