How to Buy and Sell Real Estate at the Same Time-
Portland’s current real estate market is leaning towards a seller’s market with low inventory and low interest rates. This can make it very challenging for move up buyers to sell and purchase a new home simultaneously. There are many reasons why we need to move up from our first homes or down from our forever homes and this article will outline some of the strategies used to accomplish these real estate goals.
If you find yourself in the boat of “we want a new home, but not just any home” it can be difficult to put your house on the market without securing another property. We know many buyers where this is the case and also the down payment for the new property is coming from the proceeds of the sale on the old property. It is not always possible to have both transactions – the sale of your current home and the purchase of your new home- happen simultaneously.
There are cases where this does happen and this scenario would be considered a contingent offer. To make this happen you would need to look at new homes, find one you like and write an offer contingent on your current home selling. Both of these transactions would have similar closing dates, just within a few days of each other. The pros to this option is that you would only have to move once, the money needed to purchase the new home would be liquid and there is little stress about not having anywhere to go. The cons to this plan are that in a seller’s market it is extremely difficult to compete with other offers and the stress of listing and selling your current home quickly can be overwhelming. Sellers will look not only at the price of the offers, but also the terms and almost always a cash offer will win out on a contingent offer. Here are some steps to take if this option is one you are considering:
• Fix any items you know might be defective on your home. Do you need a new roof? If the answer is yes, take care of that prior to putting your home on the market. You want to be market ready when you find your new home, otherwise it could take weeks or months to make this happen and your contingency could expire or the sellers of the new home could find other buyers.
• Start packing your stuff. Go through things and donate what you don’t want and consider storing other items that might just take up space when selling your home. Do you have too much furniture in your space? Do you have an old RV parked in the gorgeous grass? If so, maybe it’s time to rent a temporary space to store these things.
• Start home shopping and learning the market. This is very important, especially in a seller’s market. Most contingency offers we see actually happen in a seller’s market are listings that have been on the market for some time or are slightly over priced. This is the time to become informed about what it is you want in your new house.
Another option, if you are not ready to blindly put your house on the market and see where you might land is listing your home contingent to finding a suitable replacement property. This is an excellent option for sellers that want to move up, but can’t do so without selling their current home and also will not settle for just whatever is out there on the market. In this case you would want your agent to make the listing and sale of your house “contingent on finding a suitable replacement property.” We would recommend putting your home on the market and disclosing this contingency in the listing. This shows potential buyers that the escrow period might be extended in order for you to find replacement housing. The pros to this option are that there is little stress in finding a new home – if you don’t find one you are not obligated to sell your current home, you will have a purchase contract already secured prior to looking for a new home and you will only have to move once. The cons to this option are that you might not find a home that is suitable within a reasonable amount of time and might lose your potential buyer to another property that is more available to them. If this option is of interest to you we would recommend:
• Getting your house ready to sell with the above mentioned strategies and then list your property with the contingency clause. Advertise that you are selling, but only if you can find a new home that satisfies you.
• Start home shopping ASAP. This scenario can be a real win-win for everyone involved if you are informed of what is out there, your new budget and so on.
Some people choose to sell their homes before buying a new one. This option can be accomplished if you have courage to be “homeless” and the desire to move into temporary housing. You could rent an apartment on a month to month basis, look for a long term rental through airbnb.com or a hotel, and move in with friends or family and so on. The pros to this option are that there is little stress when selling your home, no time restraints on selling your home and no time restraints on looking for a new home. The cons to this option are that you will have to move twice, pay for storage for your belongings and live somewhere that is less than ideal for some time. Overall, this option is disruptive, but much less pressured than the previous two. If this option is one you want to explore we would recommend the following:
• Rent a pod to store your stuff. Get everything not needed to stage your house to sell out and into the pod. This will help with selling your house and also with storing your belongings while you live somewhere temporarily.
• List your house and start looking at other properties.
• Start looking for temporary housing. Educate yourself on the rental market and what’s out there.
• Get pre-approved for your new home ASAP. You do not want to sell your property only to find out that you cannot qualify for a suitable replacement.
Yet another option would be to buy your new home before selling your old one. This can only be accomplished if you have the means to do so and the courage to carry two mortgages while you are selling your old home. The pros to this are that there is no pressure while looking for a new home and your offer will be stronger than a contingent offer. The cons to this option are the risks involved. It can be a risky move to obtain another property and mortgage, even temporarily. What happens if the old house doesn’t sell? Will you take less for it than desired just to get that second mortgage off the books? Another thought with this option is to buy the new home and rent out the old one. This can give you more time to sell your property all while you are getting paid monthly rent – hopefully enough to cover the mortgage. If you are considering this we would recommend:
• Get pre-approved, find a home and buy it!
• Get your old home ready for selling or renting and then research the market. It is wise to look for a potential renter while you are in escrow on the new property.
There are ways to buy and sell at the same time. Some of these above mentioned strategies are very common where others are less traditional. There are always lease options, owner carried financing and trade options. Some sellers are willing to carry an owner contract for a short amount of time or do a lease option while you sell your old house. After selling your original house, you could refinance or obtain a loan on the new property. This option is good if you are unable to traditionally finance two properties at once. Another option would be to trade your home for the new one and finance the difference. Essentially this is the same as buying and selling at the same time, just with different terms.
If you find yourself somewhere in these scenarios we would be happy to discuss this further with you. Thinking outside of the box and being creative can come in really handy when negotiating one of the biggest purchases of your life. No matter why you are moving, you should be able to make it happen with what you have to work with.
Written by Amanda Folkestad and Brian Porter