The rapid advancement in the real estate sector has allowed property owners to buy and sell property at the same time. Today, home owners can borrow up to 95 or 100 percent of their home’s value and use the same money as their down payment to purchase their next house by simply opening a home equity line of credit (HELOC).
Nevertheless, buying and selling property at the same time is a tricky transaction that requires a high level of balancing and co-ordination. The process can also be stressful and difficult with a lot of risk at hand. Most people are usually split between buying first then selling or selling first the buying. Nonetheless, below are some tips to walk you through the whole process smoothly.
Strategy 1: Buying Before Selling
Buying a new house before selling your previous house is certainly a trickiest affair as it requires more of financial wangling. It is possible to land your dream home before selling your current house and therefore you could have opt to close the sale before losing out on your dream property. Buying before selling also saves you the stress of moving twice: first to a rental home then to your newly purchased house. Constant moving is indeed frustrating and you may want to consider this strategy. If you are in view of this option, below are some vital tips.
#1. Apply For A Bridge Loan.
A bridge loan enables you to deal with the financial strain that comes with buying a new house before selling the previous one. This loan unlike others is a short-term loan that enables you to pay off the mortgage of your newly acquired home to avoid cost carrying. Additionally, bridge loan is easily repaid by the proceeds from the sale of your old home therefore does not accumulate interest with time like mortgages. You are able to offset this loan within a very short time after the sale of your home.
#2. Go For A Home Sale Contingency
A wise decision when buying before you sell is to factor in a home sale contingency to any selling offer you are planning to make. This will enable you find a potential buyer for your old house within a set period of time before moving even moving to your new house. You are also provided the option of extending the contingency contract to you preferred timeline if you are unable to find a buyer in time. However, home sale contingencies aren’t much used these days since most property sellers do not find any benefit in them as they are not a guarantee that a buyer will actually acquire the property in question. Nevertheless, a home sale contingency contract can still come in handy when buying before selling.
Strategy 2: Selling Before Buying
#1. Plan Your Settlement Date
Since you are still in control of two properties, you can take the advantage of the settlement date and avoid the need of moving twice within a short time. Draft a plan such that the settlement date of your new home coincides with the closing date of your previous home. This way, you are sure to directly move to your new house without necessarily renting. It’s worth noting that having a matching settlement dates calls flexibility as well as in-depth negations with the parties involved and sometimes it may fail to go as planned. Just be prepared for anything by having a plan B.
#2. Negotiate For A Rent Contingency
After selling you old house, you may want to request for a rent-back contingency from the buyer-now-owner as you wait to move in to your new house. This provision allows you to rent back your house but it’s essentially a favor from the buyer. A rent-back contingency is therefore never a guarantee and you may have to look for other alternatives such a short-term rental if this ‘favor’ is not granted.
Selling your old house and buying a new one at the same time is a gamble that requires an act of balancing. Selling before buying seems like a better option as it provides with the opportunity to budget for your new home and it’s also financially secure. If you are unsure of the whole process, The Pattisall Group-Hilton Head Real Estate can assist you undertake the whole process smoothly.