Buying A Home While Listing A House For Sale
Listing a house for sale and buying a home at the same time is no easy feat. Unless you can afford to carry 2 mortgages at once, it'll take some extensive planning.
Here's what to consider when simultaneously buying a home and listing a house for sale.
Decide Whether To Sell Or Buy First
In an ideal situation, you'd be able to buy a new home, move and then sell your old home.
"If you have the financial reserves or the income to qualify to purchase without selling, then you are in a great place," says Ron Phipps, principal with Warwick, Rhode-Island-based Phipps Realty and past president of the National Association of Realtors.
Of course, paying for 2 mortgages at once simply isn't feasible for a lot of people.
Use these steps Phipps suggests to decide your first move:
- Meet with your mortgage originator and financial planner to review your financial situation.
- Have at least one, but ideally 3, real estate agents meet and review both the value of your home and the best strategy for selling it.
- Start looking at potential homes to purchase. If your options look good, organize a plan with your mortgage originator and real estate agent.
One strategy, Phipps says, is to make an offer on a new home subject to the sale of your current home.
The downside to that strategy is that some sellers, particularly those in a seller's market, will not consider a contingent proposal, notes Phipps.
Another strategy is to do it all at once.
"Most people sell their existing home and close on the next home on the same day ... It is awkward, but with the right assistance and coordination, you can make it work," says Phipps.
When it comes to simultaneously buying while listing a house for sale, it's crucial to take a very close look at your finances.
"Have enough capital to cover both the offer/purchase of your new home (deposit, inspections, reports) and the sale of your existing home (staging, preparation, contingent repairs)," says Rich Arzaga, CFP professional and CEO of Cornerstone Wealth Management Inc. in San Ramon, California.
Arzaga says that while certain closing costs can be paid in escrow, not having enough cash for expenses required before closing will cause stress on the transaction and on your financial behavior. And that can cause negotiating mistakes.
Phipps adds that it's important to consider what you're comfortable doing.
For instance, if you qualify to spend $3,000 a month between 2 houses, but you're comfortable spending only $1,500, you need to step back and strategize.
Finally, shop around thoroughly for the best mortgage rates. Having a low interest rate on your new mortgage can certainly free up some cash.
Do Your Research And Get An Advocate
It's better to have an advocate help you though this process rather than do it yourself, notes Arzaga. That goes for both buyers and sellers.
"Real estate lore is full of stories of people who thought they could save on the real estate commission, only to find their overall experience or cost of litigation or stress take a higher toll than the cost of hiring an agent," says Arzaga.
And there's more to real estate transactions than you may think.
The typical real estate transaction has approximately 150 steps, notes Phipps. A good real estate agent will be able to help you through virtually all of them.
Realtor.com has a rating system for agents -- that's a good place to start looking. Phipps advises looking for agents with special designations such as Certified Residential Specialist (CRS) and Accredited Buyers Representative (ABR).
Negotiate When Buying, Too
It's sometimes easier to remember to negotiate when selling your house, but don't be afraid to negotiate when buying, as well.
Remember, you'll have more or less negotiating power depending on your market.
If you're in a market that favors buyers, getting acceptance on a contingency offer will be slightly easier, says Arzaga. Just be careful not to be too aggressive on your terms if you really like the property, he adds.
On the other hand, if you're in a hot seller's market, you may have to compete with cash offers. If you find yourself in that situation, and it's a home you really want, consider offering a premium, Arzaga advises.
But keep in mind that when you offer a premium, the appraiser may not agree with the offer and appraise it for less. That means you'll be paying more cash out of pocket.
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Copyright 2016, Bankrate Inc.