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Selling One, Buying Another
In a perfect world, you sell your old home and buy the new one on the same day. Given that things rarely turn out perfectly, here are some things to keep in mind as you negotiate the sale of one house with the purchase of another.
Time it right
Fall and spring are the best times for homes to move and you want to consider the season of the year when buying and selling. And if the closing dates arent going to coincide, a gap rather than two mortgages is the better. Its easier and usually cheaper to find temporary housing than juggle two mortgages.
Selling First
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Selling your home before buying a new one minimizes financial hazards. Even if you have to find temporary housing, its generally cheaper than two mortgages.
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Get an appraisal first thing off the bat. That way youll have a good idea how the sale of your home will effect your purchasing power on the new one. This will help keep you from over extending your mortgage abilities.
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Get pre-approved on a loan for the new home.
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Until most of your contingencies have been met, wait to put an offer on a new house. You dont want to be left holding the bag, or in this case, the house.
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If youre ready to accept an offer on your home, but havent found the right new home, negotiate a long escrow or a sale/lease back. This will give you more time to look for the new home. Otherwise, look for temporary housing.
Buying First
It happens. Youre only thinking of buying, and suddenly the right home shows up. Now you have to sell your old home quickly. Here are some tips on making things work in your favor:
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Negotiating a long escrow on this side of the sale works, too. You can also make the purchase contingent on your house selling. This will work better in a slow market, but its worth a try in any market. You never know what may also work best for the seller of your new home.
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Try and schedule the closing date of your current home prior to the closing on your new home. Temporary housing is generally a better situation than two mortgages.
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Take a close look at what price youre going to ask for your home. Make sure its realistic in the current market.
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When you get an acceptable offer, check the buyers credit history. You dont want any surprises that are going to delay things. If youve closed on the new home, but havent sold the old one, consider renting it out, or taking it off the market until the next season (or until the market improves).
Same Market or Across Country
Generally, if youre buying and selling in the same market, you can negotiate closing dates to work for you. But when youre dealing with a cross country move, its a lot harder. A real estate professional really comes in handy at this point. Legal documents can be faxed or sent via overnight courier and your focus wont be stretched to the limit. You may end up renting one home or the other, or have to consider a bridge loan. But with someone local in the market on your side, it will hopefully be less stressful.
Show Me the Money
Make sure you have a tight hold on, and a clear understanding of, your financial situation. Cash reserves are always helpful, but never more so than during the purchase of a home. Two to three months is the recommended reserve, but if you dont have it, this is where the bridge loan comes in handy. Some lenders are more inclined to make a loan if its for the purchase of a home. If youre a smart shopper/seller, youll accept an offer from someone whos flexible about move-in dates. It can save you money in the long run. Too many moves with storage costs can quickly eat up any profit you may have made in the transaction.
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