Regardless if you are buying a home or selling a home it is an event that is filled with timelines and challenges. Events must take place in a certain order and with positive outcomes (like inspections, appraisals, approvals) or else the whole transaction comes to a halt. If you are purchasing a home and selling a home at same time you have doubled your workload.
It can be done and it is done all the time. If you are facing this delicate situation in real estate please read these 3 keys that will help you successfully sell and buy at the same time.
1. Meet with your loan officer/mortgage broker first
Of course if you are buying a home you would be speaking with a loan person eventually. Actually, if you are selling a home with which you will use the proceeds to purchase a home then speaking with a loan specialist first is the best way to proceed.
There are 2 key pieces of information your loan person will help you with:
First, they will be able to pre-qualify you for a home purchase. They will look at your financial picture and help you understand what amount of a loan you can qualify for. This is important because it will also indicate how much of a down payment you will need and the closing costs that you will need. This will aid you in setting the price to sell your home; you will know what the absolute minimum you will need to net from the sale in order to be able to purchase your next home.
Second, by taking a look at your financial picture they can determine what, if any, changes the sale of the home will do to your credit score. You do not want a surprise here.
Also, when you speak with your lender they might be able to provide you with some options that you can take before you sell and buy. They may suggest a re-fi to lower your mortgage payment which will help you qualify to buy at the same time as owning.
In short, speaking with a loan officer will help you completely understand your financial picture and outline the steps that need to be taken to successfully conduct both transactions at the same time.
2. Meet with a real estate professional far in advance of listing the home
Of course I am going to say this because I am a real estate professional. Well, yes and no. Even if you plan on trying to sell it yourself, many real estate professionals are happy to talk selling with you anyway.
When you meet with your agent your goal is to understand what is happening in your neighborhood. Real estate is a local business. You want to speak with someone who knows what is happening at the neighborhood level. As a licensed agent for the state of California I can buy or sell anywhere in the state (technically.) However, you would be crazy to use me to purchase up in San Francisco because I do not know that market. However, if you want to buy or sell in San Diego I am your man because I know my market and my neighborhoods.
Some answers you will want to get:
• How long are homes staying on the market
• What prices are they selling at
• What can you change in the home presentation to help it sell faster and for more money
Of course none of us realtors has a crystal ball but based on our experience and knowledge we can make pretty good educational guesses. For example, at the time of this writing I know I can sell in Golden Hill (downtown San Diego) or Santee (East County San Diego) with little problem. Those are hot markets.
What Does Far In Advance Mean?
If you are buying and selling at the same time you want to accomplish these first 2 keys as early as possible. I am not talking 2 weeks here; I am talking anywhere from 2 months to several months before you need to make the move.
3. Explore options in case of challenges
I have bought a home and sold a home at the same time twice in the past decade. I was lucky that both times things went 99% smoothly. It is that 1% that can get really scary. That 1% can mean the difference from sleeping in your new home or sleeping in your car.
The ideal situation is that the sale of the home closes exactly on time and the purchase of the home closing exactly on time. It can be done especially if you have good loan officer and an exceptional agent. They are the chief orchestrators and can really work some magic on your behalf. But even then weird things can happen.
Which is the more important event; selling or buying? In my opinion, it is the sale of the home. I have 2 reasons:
A. The sale of the home will be used to pay the down payment and closing costs
B. The removing of one mortgage will be necessary to qualify for the new mortgage
So, you really need to look at your options here. One way to make your total dual transaction easier is to try NOT to rely on the ideal situation. You may not want to hear this piece of advice but think about it before you reject it.
Consider a short gap between the 2 events of selling and buying. This could be as small as 2 weeks to 4 weeks. It would require 2 items of preparation. First, you would need to rent a storage unit for a month. Second, you will need to make sleeping arrangements for that length of time.
What if the closing for your sale is delayed a week? If you do not have a cushion then you could be in trouble. In an extreme case, you could be in breech of contract on your purchase and potentially you could lose your earnest money deposit – or worse.
Maybe your sale closes on time but your purchase is delayed a week. Again, you are covered and do not have to scramble at the last minute to find storage for your possessions and a place to lay your head at night.
A double move (from home to storage to a new home) is less than perfect but the potential benefits might outweigh this small inconvenience. It is something worth considering.
1. It is possible to write up your listing agreement that you can retain possession of the property for an extended time past closing. However, if a buyer is desiring (or requiring) to be able to move in immediately this will eliminate them from purchasing your home.
2. Some agents might suggest that you move in early to your new home before the sale closes. I urge you to rethink this. There are many legal and financial reasons not to do this (either as the seller or the buyer – it is bad for all parties.)
3. Recently a person was selling and buying at the same time. They got their home under contract to sell and wrote a contract to purchase a home. Both started off fine in the escrow process. He ordered his inspections and appraisal as a good buyer should do and paid out nearly $1000. Then the sale of his home fell apart. His buyer could not obtain his loan. The contract was cancelled. This caused him to have to cancel his contract to buy. He got his earnest money deposit back but lost the money he spent on the inspections and appraisal. (This is another reason why placing a gap between sale and purchase is a good financial consideration.)
I hope you found this article helpful. I hope I didn’t paint a horrible picture about buying a home and selling a home at the same time. As I said in the beginning, this is done in real estate all the time. Hopefully this article has given you some keys to achieve this dual transaction successfully.
*Disclaimer – David Cairns is a real estate professional serving San Diego, California and is licensed by the State of California only under CA DRE lic #01890743. All information on davidcares.com is for informational purposes. Information regarding short sales, foreclosures, buying homes, selling homes or any other information is general in nature and is not intended or should be construed as legal, tax, or other advice. Every person has a unique situation; I would be happy to talk to you regarding real estate matters. You must consult a legally qualified person for advice in all other areas before taking any action. I can be contacted at firstname.lastname@example.org