The Best Way To Sell A Home To Buy A Home
By far one of the most common questions these days from sellers is how to sell a home to buy a home. Most people would like to buy a home and then sell theirs, without moving twice. Most people however, need the funds from their current home sale to purchase a replacement property. I can’t tell you how many times I’ve gotten a call from a potential seller and they say they want to buy a new home and sell theirs. They almost always find a home that they want to buy and their home isn’t even on the market yet. The problem with that is that by the time you put your home on the market, and go to buy the replacement property, another person has already bought it.
Sell Then Move Into A Temporary Place
If you approach selling a home to buy a home from a financial standpoint, it makes the most sense to sell your current home first. After that is done, move out and find a replacement home. I’ll tell you why. When you do this, each transaction is separate from the other. When you sell your home, you’re able to negotiate the very best deal. And each deal is based solely on that one home. There are no contingencies on the back end, which might cost you valuable time and money. It’s a bigger risk to you and the person who is buying your home. Most people don’t want to take that risk, and if they do it, it is usually at a cost. This way, selling a home by itself with no contingencies has no pressure (outside of the pressures of selling a house).
It’s easy, and once you sell your house, you can move out, and find your replacement. The people who choose to do it this way save literally tens of thousands of dollars. And they do that because they are not negotiating on each end. When you don’t do it that way you’re exposed. Whats important to know is that and both the sellers of your replacement property, and the buyers for your current home know that you are at a negotiating disadvantage. You lose so much negotiating power, it’s scary! Moving after you sell your home into an apartment for a few months can be difficult but it is worth it. If you don’t want to move to an apartment, maybe move in with family members. There are options out there, and in the long run will save you money.
Can’t Find A Home You Like
Another complaint to sell and buy a home based on a contingency is that you feel you won’t find anything you like. That has got to be the biggest reason we hear when somebody wants to sell a home to buy a home. I’ll tell you why that is simply not true. The reason you can’t find anything is because you aren’t seriously looking. When you are seriously in the market and going to move out of your home and the only thing keeping you from buying another home is finding that home. Your search habits are very different than someone that is kind of looking, and still living in their own home.
I’ll give you an example. Have you ever bought a car? What happens when you buy a car? You finally find the one you want and then after you buy it you drive it home. On you way home you notice that there is a lot of this kind of car on the road. Did everyone just jump out and go buy that same car that day? No. It’s because your awareness of that car is heightened. It’s called your reticular activator. When you focus on something, it heightens your awareness of that particular thing. When you sell a home to buy a home and the house isn’t on the market, you aren’t really looking. And sometimes lack the motivation to find it.
Buy A Replacement, Then Sell Your Current House
When you need to sell a home to buy a home, moving out and then beginning your search is the best way to do it. The second best way to do it is to buy a replacement property first. Once you find your replacement home, you can sell your current property. There is however a catch and a caveat to this. For this particular strategy to work, you need to have a source of funds to support both households. Including payments for an extended period of time. There may be a way to do this however. One of the best ways, if you work for a company that has one, is to borrow against your 401K.
Borrowing against your 401K is much better than cashing it in. Cashing it in would not be a wise move. The reason for that is you have to pay a 10% penalty and taxes on the gain. That can cost you thousands of dollars. When you borrow against it for a down payment on a home with living expenses the interest rate is usually very low. In worst case scenarios, you are only borrowing against it for six to nine months. You can pay back the interest when you sell your current home, after buying the replacement. Like before, the transactions are separate from one another, and you’re saving the equity that you’ve earned in your home. This strategy only works in very specific situations however. That is why you need to think long and hard about the risks when you need to sell a home to buy a home.
The Not So Great Way
The not so great way to sell your home to buy a home is to go out and fall in love with a home before your home is on the market. Then proceeding to make an offer on that home, and then try to sell your home. Here’s why. Imagine going out and finding a home that you love. You find it, then make an offer on that home. You want that home, and you’ve made an emotional decision about that home. And unfortunately, more often than not, it will have to be contingent on you selling your home. The hang up though, is that your home isn’t in escrow yet. In fact, it isn’t even on the market yet. The problem with that is, when you try to go and negotiate you have no leverage with the seller because you can’t negotiate price or terms. If there is any other activity on your replacement home, you will most likely have to overpay. And that’s because you are trying to convince the seller to tie up their home for possibly 15 to 30 days while you try to sell your home.
Doing it that way will cost you money. Ask yourself, why would a seller do that? Why would the seller not just keep it on the market? If you can find a seller willing to do that, and make a deal, that’s only the first step. From here, you need to sell your home, like yesterday. What that means for the sale of your home is that you will probably have to sell your home lower than all your competition to get it sold that quickly. After that, you need to make sure that buyer is on it with all of their inspections and their loan. You need to constantly be on top of them because if your home falls out of escrow, you could lose your replacement property. You have the opportunity to lose tens of thousands of dollars, because you have painted yourself in a corner.
More To Come
We’ve covered a lot about different scenarios to do when you need to sell a home to buy a home. We will be updating this blog with more information to help people who find themselves in this situation. If you want to begin your home search now or are ready to see whats out there, read our other blog about finding the perfect home. If you want to talk to us more in detail about the process of selling a home to buy a home, contact us here.