Buying a home is often challenging for many couples and individuals. They have a lot to do.
Finding the right neighborhood and local amenities, setting a budget, saving for a down payment and future mortgage and utility bills, viewing homes, finding an experienced realtor, getting approved for a loan and getting ready to move are just some of the many things that they have to prepare for.
Deciding to buy a home while you’re currently selling your existing home can be even more complicated.
It can also be rather time-consuming and expensive. If you’re not able to sell your current home before buying another property, you may be carrying two mortgages on your balance sheet at the same time.
Fortunately, there are ways to make the entire ordeal a lot less stressful.
Buying a home in California while selling another isn’t as impossible as some may think. It just takes some concentration, patience and a little more legwork than normal.
🏠 Buying another property before selling your current home
If you are buying another property before selling your current home, here are a few things to keep in mind:
1. Consider getting a bridge loan.
Bridge loans are short-term mortgage loans. They allow you to pay off the mortgage on the home that you’re trying to sell.
When that property does sell, you can then use the proceeds from that sale to pay off the bridge loan.
Bridge loans are convenient for this kind of situation, as long as the sale of the old home and purchase of the new home go smoothly.
If there are problems or complications that delay the process, you may need to come up with alternative sources of funding to pay off the bridge loans.
Bridge loans can also be rather expensive and include high interest rates. Make sure to read the contract carefully before signing a bridge loan agreement.
2. Add a home sale contingency clause.
Another way to protect yourself in this scenario is by adding a contingency clause in the offer that you make.
The home sale contingency clause will give you a specified time period to find a buyer for your current home before you can close the sale agreement for your new home.
If you’re unable to find a buyer within that time period, you can try to either extend the agreement or walk away from the deal altogether.
Contingency clauses are handy, but they are very rarely used. They pose a significant risk to the seller because there’s no guarantee that the prospective buyer will follow through or even has the funds to complete the transaction.
It can also cause your offer to be taken with less merit and consideration than other interested parties who don’t have contingency clauses.
3. Keep both properties for a while, if you can.
If you can afford to hold on to both properties for a while, this may be your best option. While this isn’t the most popular choice, it is one that offers more security and less risk.
It gives you more time to line up a valid buyer for your existing home and also secure financing for your new home. It also eliminates the need for a bridge loan or contingency clause.
4. Make an offer on a property and then put your house up for sale.
Sometimes a property appears on the market that’s too good to pass up. Finding your dream home doesn’t happen every day, so when it does, you have to jump at the opportunity.
Make a reasonable offer on the home you’d like to buy, and then put your current home up for sale.
You can add a sale and settlement contingency for added peace of mind. Adding this means that your offer is contingent on the sale of your existing home.
While this isn’t recommended in active markets, it could be a motivating factor to get transactions moving quickly.
🏠 Selling your home before buying another place
If you are selling your home before buying another place to live, keep these tips in mind:
1. Consider finding a temporary rental.
If you’re not able to find a new home to buy before selling your home, you may want to think about renting another home or an apartment for a month or two.
It’ll probably only be a temporary inconvenience, and it allows you more time to complete the home sale process while continuing to look for the ideal property that best meets your needs.
However, short-term rentals can be a bit more expensive depending on where you look. You may also need to rent a storage locker or ask your friends or family members to keep your belongings for a while until you’re ready to move.
Related: Thinking of Selling in 2019?
2. Pay attention to the settlement date.
During negotiations, pay close attention to the settlement date.
Ideally, the settlement date for buying your new home should be the same day as the closing date on your current home (or as close to this date as possible).
This makes for a smoother adjustment when moving from one location to another because there’s less time in between. It’s also a better transition for other people or pets in your family.
3. You can ask for a rent-back contingency clause.
Another option is to ask the buyer for a rent-back contingency clause in the home sale contract. This allows you to live in your current home and pay rent to the buyer while you look for a new home of your own.
If the buyer is agreeable to this, it can give you the extra time you need. However, the buyer doesn’t have to agree to this contingency.
They may already have other plans in mind for your property, or could also be working on selling their current home.
4. Get a home equity line of credit.
Some home buyers opt for getting a HELOC, or home equity line of credit.
This allows you to borrow against the equity you’ve accumulated in your present home.
This money can be used toward the down payment on the home you want to buy. You can pay the remainder of the HELOC balance once your current home sells.
These are just some important strategies for surviving the home buying and selling process.
Take as much time as you need to make an offer on a new property and go through the sale paperwork and closing on your existing property.
Talk to your realtor to discuss what should be done along every step of the way.
Planning and being proactive can take a lot of the headaches and guesswork out of the home buying process.
You can move on and establish yourself in a new community. You’ll soon be making new friends and lasting memories.
📞 Have Questions? Ask The Chris Eckert Real Estate Team
Give The Chris Eckert Real Estate Team a call today at 650.627.3799 to learn more about local areas, discuss selling a house, or tour available homes for sale.