Selling
your home when you still need to shop for a new one can feel daunting to even
the most seasoned homeowner––especially when the demand for new homes keeps
rising, but the supply feels like it’s dwindling. ¹ You’re not alone either if
you’re already feeling drained by the complex logistics of trying to sell and
buy a new home all at once.
Searching
for a new home can be exciting, but many homebuyers admit that it can also be
stressful, especially if you live in an unpredictable market with plenty of
competitors. Unfortunately, waiting out a competitive housing market isn’t
always the best idea either since listings are expected to remain limited in
the most coveted neighborhoods for some time. ²
That
doesn’t mean, though, that you should just throw up your hands and give up on
moving altogether. In fact, as a current homeowner, you could be in a better
position than most to capitalize on a seller’s market and make a smooth
transition from your old home to a new one.
We can
help you prepare for the road ahead and answer any questions you have about the
real estate market. For example, here are some of the most frequent concerns we
hear from clients who are trying to buy and sell at the same time.
“WHAT WILL I DO IF I SELL MY HOUSE BEFORE I CAN BUY A NEW ONE?”
This is
an understandable concern for many sellers since the competitive real estate
market makes it tough to plan ahead and predict when you’ll be able to move
into your next home. But chances are, you will still have plenty of options if
you do sell your home quickly. It may just take some creativity and compromise.
Here are some ideas to make sure you’re in the best possible
position when you decide to list your home:
Tip #1: Flex your muscles as a seller.
In a
competitive market, buyers may be willing to make significant concessions in
order to get the home they want. In some cases, a buyer may agree to a
rent-back clause that allows the seller to continue living in the home after
closing for a set period of time and negotiated fee.
This
can be a great option for sellers who need to tap into their home equity for a
down payment or who aren’t logistically ready to move into their next home.
However, many lenders limit the duration of a rent-back to 60 days, and there
are liability issues to consider before entering into an agreement. A contract
and security deposit should be in place in case of any property damage or
unexpected repairs that may be needed during the rent-back period.³
Tip #2: Open your mind to short-term housing
options.
While
it can be a hassle to move out of your old home before you’re ready to move
into your new one, it’s a common scenario. If you’re lucky enough to have
family or generous friends who offer to take you in, that may be ideal. If not,
you’ll need to find temporary housing. Check out furnished apartments, vacation
rentals and month-to-month leases. If space is an issue, consider putting some
of your furniture and possessions in storage.
You may
even find that a short-term rental arrangement can offer you an opportunity to
get to know your new neighborhood better—and lead to a more informed decision
about your upcoming purchase.
Tip #3: Embrace the idea of selling now and buying later.
Instead
of stressing about timing your home sale and purchase perfectly, consider
making a plan to focus on one at a time. Selling before you’re ready to buy
your next home can offer a lot of advantages.
For
one, you’ll have cash on hand from the sale of your current home. This will put
you in a much better position when it comes to buying your next home. From
budgeting to mortgage approval to submitting a competitive offer, cash is king.
And by focusing on one step at a time, you can alleviate some of the pressure
and uncertainty.
“WHAT IF I GET STUCK WITH TWO MORTGAGES AT THE SAME TIME?”
This is
one of the most common concerns that we hear from buyers who are selling a home
while shopping for a new one, and it’s realistic to expect at least some
overlap in mortgages. To make sure you don’t get into a situation where you are
carrying dual mortgages for longer than you can afford, examine your budget and
calculate the maximum number of months you can afford to pay both.4
If you
simply can’t afford to carry both mortgages at once, then selling before you
buy may be your best option. (See Tip #3 above.) But if you have some
flexibility in your budget, it is possible to manage both a home sale and
purchase simultaneously. Here are some steps you can take to help streamline
the process:
Tip #4: As you get ready to sell, simplify.
You can
condense your sales timeline if you only focus on the home renovations and
tasks that matter most for selling your home quickly. For example, clean and
declutter all of your common areas, refresh your outdoor paint and curb appeal,
and fix any outstanding maintenance issues as quickly as possible.
But
don’t drain unnecessary time and money into pricey renovations and major home
projects that could quickly bog you down for an unpredictable amount of time.
We can advise you on the repairs and upgrades that are worth your time and
investment.
Tip #5: Prep your paperwork.
You’ll
also save valuable time by filing as much paperwork as possible early in the
process. For example, if you know you’ll need a mortgage to buy your next home,
get pre-approved right away so that you can shorten the amount of time it takes
to process your loan.
Similarly,
set your home sale up for a fast and smooth transition by pulling together any
relevant documentation about your current home, including appliance warranties,
renovation permits, and repair records. That way, you’re ready to provide quick
answers to buyers’ questions should they arise.
Tip #6: Ask us about other contingencies that
can be included in your contracts.
Part of
our job as agents is to negotiate on your behalf and help you win favorable
terms. For example, it’s possible to add a contingency to your purchase offer
that lets you cancel the contract if you haven’t sold your previous home.
This
tactic could backfire, though, if you’re competing with other buyers. We can
discuss the pros and cons of these types of tactics and what’s realistic given
the current market dynamics.
“WHAT IF I MESS UP MY TIMING OR BURN OUT FROM ALL THE STRESS?”
When
you’re in the pressure cooker of a home sale or have been shopping for a home
for a while in a competitive market, it’s easy to get carried away by stress
and emotions. To make sure you’re in the right headspace for your homebuying
and selling journey, take the time to slow down, breathe and delegate as much
as possible. In addition:
Tip #7: Relax and accept that compromise is
inevitable.
Rather
than worry about getting every detail right with your housing search and home
sale, trust that things will work out eventually––even if it doesn’t look like
your Plan A or even your Plan B or Plan C. Perfecting every detail with your
home decor or timing your home sale perfectly isn’t necessary for a successful
home sale and compromise will almost always be necessary. Luckily, if you’ve
got a good team of professionals, you can relax knowing that others have your
back and are monitoring the details behind the scenes.
Tip #8: Don’t worry too much if your path is
straying from convention
Remember
that rules-of-thumb and home-buying trends are just that: they are estimates,
not facts. So if your home search or sale isn’t going exactly like your
neighbor’s, it doesn’t mean that you are doomed to fail.
It’s
possible, for example, that seasonality trends may affect sales in your
neighborhood. So a delayed sale in the summer or fall could affect your
journey––but not necessarily. According to the National Association of
Realtors, the housing market tends to be more competitive during the summer and
less competitive during the winter.5 But it’s not a
hard and fast rule, and every real estate transaction is different. That’s why
it’s important to talk to a local agent about your specific situation.
Tip #9: Enlist help early.
Which
leads us to our final tip: If possible, call us early in the process. We’ll not
only provide you with key guidance on what you should do ahead of time to
prepare your current home for sale, we’ll also help you narrow down your list
of must-haves and wants for your next one. That way, you’ll be prepared to act
quickly and confidently when it’s time to list your house or make an offer on a
ne-w one.
It’s
our job to guide you and advocate on your behalf. So don’t be afraid to lean on
us throughout the process. We’re here to ease your burden and make your move as
seamless and stress-free as possible.
BOTTOMLINE: COLLABORATE WITH A REAL ESTATE PROFESSIONAL TO GET
TAILORED ADVICE THAT WORKS FOR YOU
Buying
and selling a home at the same time is challenging. But it doesn’t have to be a
nightmare, and it can even be fun. The key is to educate yourself about the
market and prepare yourself for multiple scenarios. One of the best and easiest
ways to do so is to partner with a knowledgeable and trustworthy agent.
A good
agent will not only help you evaluate your situation, we will also provide you
with honest and individually tailored advice that addresses your unique needs
and challenges. Depending on your circumstances, now may be a great time to
sell your home and buy a new one. But a thorough assessment may instead show
you that you’re better off pausing your search for a while longer.
Contact
us for a free consultation so that we can help you review your options and
decide the best way forward.
Sources:
1. Board of Governors of the Federal Reserve System, FEDS Notes –
https://www.federalreserve.gov/econres/notes/feds-notes/housing-market-tightness-during-covid-19-increased-demand-or-reduced-supply-20210708.htm
2. Federal Reserve Bank of St. Louis, FRED Economic Data –
https://fred.stlouisfed.org/series/MSPUS
3. Realtor.com –
https://www.realtor.com/advice/sell/what-is-a-rent-back-agreement/
4. Bankrate.com –
https://www.bankrate.com/real-estate/sell-your-house-while-buying-another/
5. National Association of REALTORS –
https://www.nar.realtor/blogs/economists-outlook/seasonality-in-the-housing-market