Your life has taken a new direction – your company is transferring you across the country, you’re welcoming your third child into your two bedroom home or you’re sending your last child off to college. Suddenly the house you have doesn’t meet your needs anymore. You find yourself in the difficult position of needing to buy a new home – when you already have one.
The only thing trickier than buying your first home is the dilemma of needing to find a new place to live when you already own one. There are many issues to consider, the least of which is the delicate tightrope of timing you’ll need to walk to pull this off successfully. Many people don’t have enough disposable income on hand to pay two mortgages, and few people relish the thought of moving more than once because they’ve had to find a short term rental to bridge the gap between the time they sell their existing home and the time they can move into their new one.
Here’s some of our top suggestions for planning this difficult maneuver:
Be Market Savvy
Take a little time to become familiar with the real estate market or markets you’ll be working within. You’ll need to know if the current market favors buyers or sellers, since you’ll be filling both roles. If you’re moving to a different city or state, it’s very possible you may find that the market where you’ll be buying is very different from the market where you’ll be the seller. Your strategy and plan of action will depend on which side of the transaction has the power. In a market that favors the buyer, you’ll be more likely to have a choice of homes readily available for you. In a market that favors the seller, you’ll probably have several potential buyers putting bids out on your home. Ideally, you’ll be selling in a favorable market as well as buying in one. If not, you can use this knowledge to make your best move first.
Time Your Tactics Carefully
Whether you’ll buy first or sell first depends on a lot of factors. Buying first – unless you have a nice-sized nest egg put aside – can skew your debt to income ratio and make it more difficult to get a second mortgage while you’re already carrying your first. Juggling two house payments can be difficult, so make sure you’ll have the funds available to get you through the second half of the transaction. Be prepared to face the fact that your current house may be on the market longer than you think or may sell for less than you expect. However, buying first does have its advantages. It does ensure that you’ll be able to move on your own schedule, and not have to worry about the inconveniences of multiple moves and finding temporary housing. You’re likely to have more than one solid choice when it comes to a new home if the market favors buyers, which is a big plus if something goes wrong with your first pick.
Selling first will make financing your new home easier, but in most cases you’ll need to move more than once in a short period of time. Finding temporary housing may be difficult, and you’ll need to consider things like whether or not your children will be finishing a school year in the same classroom, whether you’ll need to put most of your things in storage, or the difficulties involved if you need to scale down to a smaller place than you’re used to while you wait to move into your new permanent home. If the market favors sellers, you may want to strike while the iron is hot and take full advantage of your opportunities. In some situations, you may want to explore the option of a rent-back agreement with your buyers. In return for a reduced price or the payment of rent, you may be able to delay your move out of your old house for up to 60 days if you need somewhere to stay while you finalize your plans for your new home. This doesn’t always work, as it is contingent on the buyers not needing to take immediate possession of their new home. However, if you need a short period of time to coordinate your transition, it never hurts to ask.
Have Some “Secret Weapons” Ready
Consider a bridge loan. Designed to be short-term loans, bridge loans are especially helpful when you don’t have deep pockets to cover the cost of two mortgage payments. They’re meant to be repaid in full when your original house is sold. If the market favors sellers, and your home has the potential to move quickly, many lenders are more than willing to finance bridge loans to consumers with a solid credit history.
Proposing a contingency sale is also an option. Buyers can stipulate that the purchase of their new home depends on the successful sale of their old home. If the market is competitive, sellers will be unlikely to agree; however, if the seller’s home has been on the market for a while, everyone could benefit from this arrangement if your home has features that will help it sell quickly.
If you have any questions about buying and selling a home at the same time, or would like some information and advice on local trends in real estate, don’t hesitate to contact us at Ernest Signature Custom Homes. You can call (912) 756-4135 or send us an email. Our knowledgeable staff is always ready to help you make the transition between your current residence and a new home a smooth one!