Need to sell your home to move up or down?
This is the typical conundrum that we face in our market:
there are fewer homes on the market because, while it can be “easy” to sell
your place in this market, it is not so easy to buy your replacement property. This is why many people have postponed their real estate plans.
There are a few ways around this, all requiring to be well prepared:
-
Arrange for temporary housing, with the help of your
friends or family: a short-term solution sometimes can be found if you turn to
relatives or friends who may have a second home, a vacant rental unit, or even
room in their house. This is not ideal but could enable you to sell your
house first, and have less pressure to find the replacement home.
-
Place a contingent offer: “subject to the sale of your
property within ..xx days”. This refers to a condition in your offer to
purchase, with the condition that you will be “in contract” on the house that
you have to sell within so many days. There is quite a bit of preparation
to be able to achieve that: you need to be ready to go, on the starting blocks,
for the sale of your house - before you place an offer on another house.
That means all inspections done, all repairs done (if any), and the whole marketing
file ready to go. Usually, once your offer has been accepted, and if it
is well negotiated, you have a few days before the other party can cancel on
you, so that you do not find yourself having sold your home, and with no place
to go.
-
Sell first, and arrange for a rent-back. This
means that you take an offer subject to you being able to stay in your home for
a given time, renting it from your buyers, to enable you to find a replacement
home and buy it. If your buyers are buying with a new loan, the
rent-back will most likely be limited to a maximum of 2 months.
If they buy all cash, then this limit disappears. This gives you an
additional chance that you will not have to move twice.
-
Arrange for a “bridge loan”. This solution, in
the most recent
version, will let you borrow up to 70% of the value of both
homes at a high interest rate for a few months, as long as you qualify for the
final (purchase) loan. The goal will be to purchase, then sell as soon as
possible, and refinance the bridge loan into a "normal" loan.
An alternative is to get a line of credit on the 1st house and use the
cash for a larger down payment on the second house, but in that case your
lender will need to see you qualify for both loans + the line of credit.
You avoid that with that new "bridge loan". It can be
expensive, but if it is only for 2 to 3 months and it does enable you to move,
it can be worth it. Call me for further information.
Unfortunately, there is still currently no real bridge loan,
as they existed a decade ago (see my previous blog from 2013: "
But, where did the old bridge loans go??"). But it is nonetheless possible, with good
preparation, to “sell and buy”. It is made a little easier lately by the fact that the local market is slowing
down: fewer multiple offers, and more properties languishing on the
market. The inventory is going up nearly
everywhere, and some sellers are more willing to accept a “contingent” offer,
if it is otherwise a good offer.
For this to happen, it is also important to be aware of whether it is easier to sell a home or to buy one in the exact locations you
are considering: the location you leave, and the location you want to buy in. Your Realtor, a local specialist, is
essential to help you with the research.
Thank you for reading - Let me know if I can help you with your real estate plans.
Francis
A worthy local non-profit to remember: Community Services Agency in Mountain View. Meeting you there next week to serve food? On Tuesday afternoon.
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