by Lee Nelson
Selling your home can be a stressful situation. So, can you imagine the stress of selling your home and buying another one at the same time?
For some, carrying two mortgages at one time (just in case you buy the second home before the first one sells) is an incredibly frightening thought.
But all that anxiety can be reduced by knowing your options, understanding how to get your house ready to sell and finding a good realtor to help you through the confusion and teach you about the real estate market around you.
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Get an Offer on your Current Home before Buying Again
Shelly Borota, real estate agent for Century Realty in DeWitt, Iowa, is working with several clients right now who are putting their homes on the market but wanting to buy other houses, too.
“I advise them all to get an offer on their old house before putting an offer on another house because they will have more buying power that way. But no one is listening,” she says.
So, it leaves a big domino effect. The clients put contingency clauses in the offers saying they need to get an offer on their old house before they can buy the new one.
“It used to be an issue for a contingency,” Borota says. “People weren’t keen on accepting a contingency. But now the market is strong enough, and people are little more acceptable of it. They know the home will sell.”
But getting your home ready to sell can be one of the time drainers when you want to sell it fast.
For instance, Borota continually told her sister to clean up her house and get it ready if she was ever planned on selling it.
“But she didn’t. So, when she found another house to buy, it took us 5 days to get it ready for showings. We had to move out a lot of their stuff, repaint rooms and make it all pretty,” she says. “But it looks great now.”
She also has had a few clients who had to find temporary housing such as living with relatives or renting another home for a short period of time in between selling their old home and finding their dream home.
“Moving once can be stressful. But if you can’t find the right house to buy, you might be stuck moving twice – once into short-term housing,” says Brendon DeSimone, real estate expert at Zillow, an online real estate database. He also sells real estate in San Francisco and New York City.
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Negotiating a “Rent Back” from the Buyer
What other things can you do if you sell your old home before finding a new one?
DeSimone says you can negotiate a “rent back” from the buyer. You can request that they allow you to rent the home back from them for a month or two longer after the closing date to allow you to find a house you want.
“It’s a strong market, so you can negotiate a free rent-back. For instance, if your home is listed at $500,000, you can take $490,000 from the buyers and get a free rent back,” he says. “Things like a free rent back are so much more valuable than a little extra money in the bank for you as the seller in negotiations because you don’t have to move so quickly.”
But before anything happens with selling your home or buying another one, you should know your finances and what you can afford and what your home is worth, he says.
Finding a good real estate agent and mortgage lender who can work together also can ease your worries. They can guide you through the difficulties and answer all your questions.
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Consider a Home Equity Line of Credit to help you Buy Again
Real estate and lending have changed dramatically in the past few years, DeSimone says. Before the whole banking crisis, it was very easy for people to buy a new home before ever selling their old one.
They could leverage the equity in their homes by opening a home equity line of credit. They were able to borrow up to 95 percent or even more of their home’s value and use that money as the down payment for the next home. They would close on the new home before ever selling the old one.
DeSimone is seeing more equity lines of credit being offered recently.
“Small banks are taking the risk again. If you have enough equity in your place, some of these banks might give you 20-30 percent of the equity,” he says.
If you are in a situation of buying another home, you should ask a “zillion” questions about the seller to the listing agent, he suggests.
“You can ask things like why haven’t they bought yet and who really are these people. Find out as much about them as possible. It gives you better information to write a better offer on their house that will be accepted and allow you to negotiate more things,” he says.
For instance, you might be able to negotiate a longer period for the closing day such as another month or two on top of the typical 45 day closing. You can disclose in your real estate listing that you are selling “subject to seller finding suitable housing” to alert those interested in your home that you have to find a home to move to before the sale is final.
“As a seller, you can structure the deal the way you want it to go,” he says.