Buying a home when you don’t already have a home is one thing. Buying a home when you already have a home can feel like juggling a set of flaming torches: Addressing the three key questions below can help you get organized upfront and plan a smoother path through the process.
What’s your price?
Have your real estate agent help you research home prices in your area. Hire a professional appraiser to provide a fair market value of your home, too. Both steps will help guide you to a realistic asking price — one that strikes a balance between making a profit and getting the property sold in a timely manner.
Buyer’s or seller’s market?
In general, if homes are taking several months to sell, and if they’re often selling below asking price, you’re in a buyer’s market. In this case, you’re likely to have more negotiating power as a home shopper, but may have to compromise on the selling end. In a seller’s market, homes don’t sit long before being snapped up. In this case, you may be able to sell your current home quickly and at full asking price, but may face hot competition to secure a new home.
➤Tip: Identify several backup homes in case your first choice gets snatched up and avoid adding too many contingencies to your offer.
Sell first or buy first?
Whether you sell your current home first or buy a new home first, you’ll have advantages and challenges. For instance, if you sell your current home before buying a new one, you may need temporary lodging and storage.
➤ Tip: You may be able to add a rent-back clause to your sales contract, wherein the new owner agrees to let you rent the home for 60 to 90 days after closing, often in exchange for a lowered sales price or rent payments.
If you buy a new home first, you won’t have proceeds from your home’s sale to assist with a down payment. You may also find yourself paying two home loans for an unknown period of time, which may make it harder to qualify for a new home loan.
➤ Tip: Bridge loans* are specifically designed to provide short-term financing for this situation. You pay off the loan with the proceeds from the sale of your current home.
You can do it!
Buying and selling homes simultaneously will always present challenges. But by planning ahead and working with a good real estate agent and an experienced loan officer, you can come through the experience with your sanity intact — and the home of your dreams!
* Borrower must be approved for the purchase of a new home with Evergreen Home Loans. The bridge loan closes simultaneously with the new purchase transaction.