You’ve got your work cut out for you if you’re thinking about selling one house and buying another at the same time. Single real estate transactions are tricky, time consuming, stressful, and risky – so doubling down on that can feel like an emotional and financial pressure cooker. Nonetheless, you may be perfectly positioned right now for a move – whether that move be for upsizing, downsizing, or a lateral move for convenience purposes. Don’t worry – you’re not alone. Although multi-tasking real estate transactions can be a feat fit for a real estate ninja, it can be done, especially with the support of the right real estate agent. You already know this isn’t going to be a fast process, a quick flip from the old house into the new. Here’s your complete guide to buying one house while selling another.
Money, Mortgages, and The Juggler
Before you decide whether you want to sell first, then buy – or buy first, then sell, you’ve got to get your money matters worked out. You have to decide whether or not you want to risk holding onto two mortgages at one time, possibly doubling-down mortgage payments while in transition. You’ll need to explore what programs and incentives are available for people purchasing additional real estate, and you’ll need plenty of money stored away in savings – some of which will serve no purpose other than a safety net while you leap.
One option is a HELOC, or a Home Equity Line of Credit. You can take out a line of credit on your current home which you can then use as a down payment on your new home. Then, sell your current home and pay off the mortgage and the home equity line of credit.
Another is a bridge loan, gap loan, or a similar incentive program designed for buyers like you who are making substantial transitions between real estate properties. The bridge loan pays the deposit on the place, then the sale of the current place pays off the current mortgage and the bridge loan.
Talk with your financial advisers and tax preparers about capital gains tax. Capital gains tax is required for sellers to pay on proceeds from the sale of a primary residential property. However, when the proceeds from the sale of one property are invested directly into another property within a specified period, capital gains tax may not apply.
In any event, you’ll need your twenty percent deposit, and additional two to eight percent of the home’s value for closing costs, and other expenses associated with making the purchase of the new home. Simultaneously, you’ll need financial resources for investing in staging and preparing your current home for sale. Furthermore, you’ll be paying for at least one mortgage, and moving expenses that included not only boxes and take (which aren’t cheap!), but also possibly moving trucks or services. That’s a lot of dollars to be tied up in different places all at once.
Working with Contingencies
Contingencies are clauses in contracts that state that the contract is only valid if certain criteria are met. For example, you can submit an offer to purchase a home with the contingency that the offer is only valid if you sell your house first. On the contrary, you can offer to sell your home, contingent on the fact that you first find another place to live within the specified time frame.
Contingencies have their advantages in that they allow buyers and sellers to move forward toward their goal, and yet offer them a way to back out if events don’t unfold accordingly. However, they can also be harmful because if a seller is considering two offers – one from a first-time buyer with twenty percent down, and yours – an offer with twenty percent down only if your house sells first, the seller might choose the other offer, even if yours includes a higher price. When a seller is motivated and needs to move fast, a contingency can be too much of a risk to consider.
Temporary Solutions | Renting Peace of Mind
Here’s something else to think about, finances permitting: You could move into a rental property right now as your first step. Once you’re out of the current property, get it prepped and listed for sale. You then have the option of either simultaneously looking for a new permanent housing situation, or you can wait until your existing home sells before moving to the next step. Of course, this is less of a convenient option for households with children because this step includes not only the extra investment financially for rent and in time for a rental agreement, but also the hassle of an extra move – so you’re moving not once, but twice.
Another renting option could be to go ahead and buy your next place, then rent your current home out, perhaps even with a lease with an option to buy, until you’ve had a chance to settle and refocus your energies on selling. It can be easier to sell a vacant property than it is to sell a house in which you still live.
In the reverse, you could lease a house with an option to buy while you focus on selling your current home, and then buy your next home as the next step.
Calling All Real Estate Agents | How Many Agents Do You Need?
A seller’s agent is a real estate agent who specializes in selling real estate properties for residential homeowners. The seller’s agent works under the guidance of and in cooperation with a brokerage, and receives payment in the form of a commission earned against the sale of the property. The seller’s agent then compensates the buyer’s agent with monetary appreciation for bringing the buyer to the sale.
A buyer’s agent is a specialist in helping buyers find their perfect home. The buyer’s agent meets with buyers to assess their budget and their wish list, then shows them properties and advises them in the transactions. Because the buyer does not earn and therefore cannot pay a commission, the buyer’s agent receives his or her payment in the form of monetary compensation from the seller’s agent as gratitude for bringing the buyer to the sale.
You may choose to hire a seller’s agent to focus on the sale of your current property, and then work with a separate buyer’s agent to locate your next home. However, you have the option to hire a single agent who can sell your current house while helping you scout out your next place. That agent would receive the seller’s commission for selling your house, and would also receive the buyer’s compensation for helping you find your next home. You may find it easier to work with one agent, centering your energies and communicating with one source rather than spreading yourself too thin between agents and projects.
You won’t begin contacting real estate agents until after your finances and credit are in order and you’re ready to start the physical transition, but when it does come time to consider which agent or agents to hire, choose carefully. Hiring the right real estate agent is imperative in experiencing a successful real estate experience whether you’re buying a house or selling, but especially when doing both, and even more so if you’re working with a single agent for both jobs. Pick a good one.
When you’re focusing on real estate agents, especially if you’re considering the route of using a single agent for both transactions, concentrate on the success of the sale of your current home as opposed to the purchase of the next house.
Interview agents. In relation to the last several houses the agents sold, what was the original asking price vs. the final sales price? How long was each house on the market? How many times was the price reduced for each property? All of this information can help you determine whether or not the agent was successful in pricing, marketing, showing, and closing the property in reasonable time.
One, Two, Skip-A-Few | Jumping Ahead in the Game
Here’s the deal. You’re probably in the beginning phases of thinking about this Olympic-quality real estate maneuver, so you’ve got time. You may also need additional time to save up your dollars and get all your ducks in a row. But that doesn’t mean you need to rest on your laurels, set back on your haunches, and wait for the time to be right. Instead, you can focus your energies during this tween time on staging, the aspects of preparing your current home for sale.
Whether you list first or buy first, whether you rent in the interim or jump from the pot into the frying pan, your current house should be staged. There’s no getting around that task, so why put off until tomorrow what you can do today?
Staging is a project that has a hand in selling the home as well as a hand in moving to your next. Your first goal in staging is to get rid of all the things you no longer need.
When staging, consider using three bins, a trash bag, a photo box, and an accordion file. Label one bin, “Pack”. The next bin, call, “Sell”. The third bin, you can name “Scrap”. Tackle one room at a time so as not to get overwhelmed, and try not to get too lost for too long on nostalgic trips down memory lane. It happens. Touch every item in a room. If you need the item but probably don’t have to have it until after you move, place it in the “pack” bin. If you don’t need it but feel it still has worth, put it in the bin of items to sell. And, if you don’t want it and don’t imagine anyone else will want it enough to pay for it, it goes in the scrap pile. When your bins are full, empty them appropriately such as into organized, clearly labeled boxes in the garage or in a designated room of the house. When you’re finished removing the excess, organize what’s left so everything is tidy. Remove anything personal – photos with people in them, artwork created by you or your loved ones, religious or political statements, collectibles, and any items that are specific to your personality and are not used daily.
With your belongings trimmed down to the bare basics, it’s time to set to the task of deep cleaning – which you can do yourself or you can outsource to a professional cleaning company. Take this time, too, to make any repairs or replace any items that cannot be cleaned or fixed. When everything is cleaned and repaired, add a few neutral and generic decorations such as potted flowers, live plants, neutral artwork, or other decorative embellishments to make the environment warmer and inviting.
Don’t forget the outside of the property. Curb appeal packs a powerful punch.
It’s far from being an easy task, but it’s entirely possible for you to buy a new house and sell your current house at the same time. Before you can consider multi-tasking real estate deals, you’ve got to make sure your financials are in order including money in savings, good credit score, and a healthy debt-to-income ratio. Have a plan for whether you want to buy first and then sell, sell first and then buy, or rent somewhere until you sort out the difference. Determine whether you’ll need individual agent representation, or if you’re satisfied having one agent represent the sale of your house and also help you find a new home to buy at the same time. No matter which order you decide to go, your first task at hand will be to prepare, pack, clean, decorate, and stage your current property for sale. Staging helps prepare for the sale of the current house, but also gets all your belongings packed away in tidy fashion, ready and waiting for your next move.
Call The Wright Choice Team today at 804-307-2589 to tour available homes for sale in the Chesterfield County area.