Need to sell to move up or move down?

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

Silicon Valley real estate specialist

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In the Valley: sell or become a landlord?

Sell or become a landlord?  That is the question.  A study by Zillow recently showed that more than 1/4 of homeowners considering a move in the next 3 years were considering renting out their home.

This question is being asked more often right now as people either are moving away from the Valley, or want to move up or down to change something to their present lifestyle. 
It is asked more often now that values have gone down from, may be, a high purchase price 3 or 4 years ago.
It is asked more often now that banks do not grant "bridge loans" like they used to, and now that rental prices go up (Nationwide, but also locally), and that it seems like just a matter of time until prices go up from where they stand now (even if it is not doing so like it was in the past 15 years).

To keep a property for ever makes a lot of sense to diversify one's portfolio.  It can and should be, long-term, a part of a retirement account if you already have a lot of money in the banking system.  Down the line, in 20 years, it will seem like impossible to afford to rent the house that today seems so high in price.

Today, as many people loose their property to short sale or foreclosure, they need to find a place to live, and this explains in part why there is pressure on rental prices.

If you are faced with this dilemna, consider the following factors:
- your confidence in the future of home values in the Valley,
- the tax implications, which could be positive or neutral for you depending on your tax situation and income, and the way the property would be managed,
- how comfortable you are with 2 mortgages,
- appeal of that kind of diversification of your retirement assets,
- who will manage the property?
- are you cut out to be a landlord?

Note: if you are moving up or down in lifestyle, the money that you may "lose" in the sale of your real estate asset might be quite equivalent to what you will gain by buying a cheaper replacement property.  So then it is a question of strategizing such a move.  If you are in this situation, contact me and we will review all the options together.

Thanks for reading,
Francis

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