This 5-part series is a “how-to” guide for moving up to your next home with as little stress as possible. Whether it’s your first time moving up or you’ve done it before, this series is a great resource. This time around, you’ve got more to think about, plan, and “get right” then when you bought your first home.
This article is for those move-up buyers who need to sell their current home first before buying their next home. Most likely, your lender has approved you only for selling first, then buying.
Next week, I will cover buying first, then selling.
If you aren’t sure which of these options if possible for you, email me and I can help you know so you can plan accordingly.
Let’s Get Started
At this point, you should know your criteria for this next home, your budget, and a neighborhood you’d like to focus on for your home search. You want to be fully prepared and ready to go whether you are selling or buying first.
Please read through the other articles in this series if you haven’t already since they will show you how to be prepared for this step: Should You Move or Stay? and What Move-up Buyers Need to First Ask Themselves.
Sale of Home Contingency – Tread Carefully
One of the first things you can do is to determine if you could have a “sale of home contingency” in the area you are looking in.
What this means is that when you put an offer on a home, you will add a contingency that says that you need to sell your current home first in order to purchase their home.
When and where the real estate market is strong, no seller is going to agree to let you write a contract on their home if you still have one to sell. They’ll have other more attractive offers to consider.
Even if they do accept your offer, they will likely be less negotiable on other terms, such as price.
So, unless you are buying in a very depressed market where sellers are desperate, then avoid a “sale of home contingency” at all costs. You’ll just be paying for this convenience in other ways.
However, if this is an option where you are looking for homes, then go for it. You’ll need to have your current home ready to put on the market quickly and then put in an offer on that home with a “sale of home contingency.”
Another Option -- Make a Plan
There is another way to make this move happen without relying on a “sale of home contingency.” And here’s how:
Follow the next three steps so you can time it all to sell your home and still buy your move-up dream home.
1.) Find the house first, just don’t buy it.
This is going to be emotionally hard, but otherwise not difficult to do. Before you sell your home, you need to know where you’ll end up once you’ve sold the home you are in.
Start looking for a home now, but you cannot, and I repeat, you CANNOT buy a home right now! That train left the station when you made your decision in last week’s article. And, most likely, your lender has approved you only for selling first, then buying.
The reason you need to look for a home now, though, is to make sure that what you are looking for is attainable, realistic, and going to happen once you need to be out of your current home.
Think of this like window shopping for a wedding dress or car or some other big purchase other than a house.
You are deciding WHERE you are going to buy it and WHAT you are buying; you even know what you are going to pay, but you aren’t actually buying it yet. That’s the level we are aiming for here.
Most of the time, move-up buyers just need to get more familiar with the options and what house they can get for their budget.
Once you feel like you know where you’ll end up, and the homes in that neighborhood fit your criteria and budget, you are done with this step. Remember, you aren’t going to buy yet; you just know where you will be once your home sells.
2.) How to time everything to make sure you get a new home when you need one.
Now that you know where you will end up once your home sells, you need to know how often homes do come up in that neighborhood and at your price point.
I can easily send you a list of what has sold over the last 12 months so you can see the pace of sales and the likelihood of one being available when you need one.
This pre-planning can give you an idea of timing and any constraints you might face in that particular neighborhood. Be sure to understand the flow of the market where you are both buying AND selling.
For example, if you were to sell or buy around the holidays, it would be more difficult to time everything. There are not as many homes on the market for you to buy and less buyers out there for you to sell to.
You’ll need to decide whether to wait to make the move-up to a more prolific time of year, but that can also have its challenges since you will face more intense competition from eager, serious buyers.
I want to hear from you several months to a year before you are ready to move so we can craft a plan to take into account all of the important timing factors.
3.) Focus on selling your current home.
At this point you know where you are headed and the likelihood of a home being available that fits your criteria and budget when you need one. Now it’s time to turn your attention to your current home and getting it in show-shape.
Remember that your ultimate goal is to move to a new home that is better suited for you and your family now. Keep that in mind and be willing to do what it takes to sell your current home in a timely manner.
But, don’t shortchange yourself, look desperate or do anything that will prevent you from buying your next home.
Once You Sell
Congrats, you’ve sold your home and now you have to find a new home that you will actually buy!
Hopefully, you’ve found buyers who are flexible themselves. That’s why it’s important to create a workable relationship with them. Remember to be cordial and flexible with your buyers and they will do the same in return.
Here are some options to help give you some time to find and close on a new home
Rent back your old home after the closing for a month or two. The buyers of your home may agree with this if they really want your home and have flexibility themselves (maybe first-time buyers who are not juggling another sale themselves.)
This gives you time to go find a home, close on it, and move during this month to 2-month time period.
Because you’ve done all your homework as mention above, you already know what neighborhood to focus on. I do off-market marketing to entice homeowners to sell their home before it goes on the market or maybe there is already one on the market for you.
With a rent-back, you already have your funds from the sale of your home, and don’t have the debt so your lender can now approve you for the purchase of your new home without a sale of home contingency. Rent-backs can be tricky so it is important to talk through potential issues.
You must NOT put an offer in on your new home until your old home has settled and you have cash in hand. You never know what will happen when your home is under contract and as the saying goes, “It’s not over until it’s OVER!”
Find a place to stay between homes. If you run out of time or have no other immediate options, then put your stuff in storage and find a short-term rental (or even stay with family). It’s not an ideal situation but it prevents you from making a drastic or desperate purchase of a new home. That’s a long-term decision so if you need to be inconvenienced for a few months, it might be worth it to get the perfect next house. Remember, your ultimate goal is the new home.
As you can see, it’s all about the timing to get this right and there are a lot of moving parts. That’s why it’s super important to be in touch with me well before you want to make a move, so we can calendar everything out and make it happen smoothly with no big surprises.
Next week is the final installment of this series “How to Move Up With Ease” and it will show you how you can buy your next home first and then sell your current one, if you have the approval of your lender to do so. This is what most of my clients prefer to do, so I’m excited to share my strategies to make that happen with you.