How To Sell And Buy A House At The Same Time
You want to move. You may want to move closer to your new job, get a bigger home, send your kids to a different school, or... Whatever the reason is, you need to sell your current home and buy a new one. Just packing your life into boxes is daunting enough task. But you need to sell your home and buy a new one. Double trouble, because current real estate market makes buying a home a competitive sport. The challenge of moving seems to be insurmountable. In this video we will talk about how to make this task manageable and even enjoyable.
First you’ll need to figure out the financial side of this transition. I assume that you are counting on the proceeds from the sale of your current home to help you finance your move. When you are ready, I will prepare a CMA for you, competitive market analysis of your home. It will give you an estimate of the sale price. Then you’ll have to factor in the selling expenses like cost of preparing home for sale, closing costs, your current mortgage payoff and commissions.
If you are a long-time homeowner here in the Bay Area, capital gains tax bill may be your largest selling expense. It is not uncommon for the owners to be faced with the tax bill in tens, if not hundreds, of thousands of dollars after selling their primary residence. There are some tactics that may allow you to avoid paying capital gains tax on this sale and I discussed them with my 1031 exchange partner Leonard Spoto. The link to that video is right there in the corner. I also included the same link in the descriptions of this video.
Armed with an estimate of much you will net after selling your home, you will be able gauge your purchasing power. You also may want to talk to your mortgage broker if you need to get a loan in order to buy your next home. Estimate your down payment option and your possible monthly payments to decide how realistic your moving plans are and if there are any other ways to achieve your goals. Some people decide to remodel their homes or to take kids to a private school instead of selling and then buying. Afterall, if the moving costs is too high, it may be better to stay put and find another workable solution.
If the finances work out, it is time to make your moving plans. One way is to identify the home you want to purchase, put an offer on it, get it accepted and then list your home for sale. This way you will move right into your new home and put the old one on the market. There are provisions for this process in the standard purchase agreement – you can buy with a contingency to sell.
In the current market conditions, however, it is almost impossible to get an offer contingent of selling another home accepted. The shortage of housing makes competitions so fierce that the sellers are expecting non-contingent offers. Even though your home is highly desirable and will sell fast, there is enough buyers competing with you that your offer with contingency to sell won’t be compelling enough to be accepted.
You still can buy a new home first by leveraging your home equity, typically through a home equity line of credit, or getting a bridge loan. Bridge loan is a short-term financing that will help you buy a new home. You should plan on repaying it as soon as you get proceed from sale. Keep in mind that bridge loans typically charge higher interest rates than conventional loans.
If you buy first, you can close on the new home, move there, and then prepare your old home for sale and market it vacant. It will be the easiest for you and for the prospective buyers. Some buyers come to the home 2-3 times before making an offer and your life will not be interrupted by many buyers’ visit. And if you need to sell first, we can get your home sold while you are living in it.
Next step would be to prepare your home for sale. When we work with sellers, we start by running a property inspection. This will let you know if there are some issues with the house that you were not aware off. When was the last time when you went into your crawl space? There may be some lose wires or some plumbing issues that you need to fix.
In parallel, we will bring designers and contractors to get estimates for the possible upgrades. Based on your budget and the timeline, we would finalize the scope of the project and the schedule for going on the market, the time when the home will be listed on MLS and made available for buyers to see. Even if you are staying in your home for the duration of sale, we would recommend making home available for viewings 24/7 until you accept an offer. Go on a short vacation or rent an Airbnb to make your home easily accessible to the potential buyers.
We will market your home and will sell it at the highest possible price. It typically takes 30 days to complete the sale and for you to get the money. While the sale of your home is being processed, we can start shopping for your new home. When stars align, we can close on the purchase of your new home on the same days as the sale of the old one. We’ve done it a few times and saved out clients the trouble of packing and moving multiple times.
And if you are moving out of the Bay Area, we still can help. We have partners in other areas and can recommend you reputable real estate agents anywhere in California and in most other places in the Unites States.
Overall, selling a home and buying a new one is a large project requiring meticulous planning. When you start thinking about it, talk to your agent, your tax adviser, and your lender. Brainstorm with them, plan the first few steps and keep your mind open, be prepared to respond to unexpected offers when selling your home and amazing opportunities when shopping for a new one.
I talked only about few aspects and options of how selling your home and buying a new one works. Your story will be different, and our team will support you on every step. Keep your eyes on the final goal and imagine yourself living in the new home surrounded by family, friends, and great neighbors. It will make this turbulent journey positive and enjoyable.