As a repeat homebuyer, you are in a completely different boat than when you bought your first home. This time around, you have to figure in selling a home, and possibly doing it before you can buy your new home. In fact, most people have to sell their home before they can buy another. So what’s the trick to selling your current home while getting ready to buy another?
Keep reading and we’ll show you how.
Put a Contingency in Your Purchase Contract
If you truly are going to buy and sell at the same time, you’ll have to protect yourself. If you can’t afford or get approved for a mortgage when you still have a mortgage, you have to sell your home. If you don’t sell it, your financing will fall through. Without a contingency in your contract stating that you have to sell your home for the contract to go through, you stand to lose your earnest money and the home you wanted to purchase.
Your lawyer can easily help you put the right wording into the contract that allows you the time to sell your home first. If you don’t sell it by the date stated in the contract, you can get your earnest money back and the seller can put the house you were going to buy back on the market. It’s not the ideal situation, but at least you are protected financially.
Use a Qualified Appraiser
You need an appraiser that will be honest with you about the value of your current home. Today it doesn’t pay to price it high and then negotiate down. This strategy worked in the past, but in today’s information age where everything is available on the internet, buyers know exactly what they want to pay for a home and they know when you are trying to use this strategy.
Don’t waste your time. Instead, hire a qualified appraiser and let him tell you the true value of the home. He can also tell you what is wrong with the home that might be an issue for the buyer’s mortgage company. This could give you time to fix the home up, maximizing your profits. Typically, the fairer your price and the better condition the home is in, the faster it will sell.
Have a Backup Plan
No matter how well you plan, your best-laid efforts might not work out. Even if it looks like you will be able to buy and sell your home at the same time, something could go wrong. So you need to plan for the worst. The worst could look like any of the following:
- You sell your home first – If you sell your home without having a new home to buy just yet, you’ll need a temporary place to live. Figure this out early in the process when you are least stressed. This way you have that to fall back on should something happen.
- Your home purchase goes through first – If your new home is ready to close on, but your home sale isn’t, you need to make sure you can afford both mortgages. Hopefully it’s only temporary, but you need to plan for the worst. Do you qualify with both mortgages? Can you handle paying both mortgages?
- You are short the down payment with the home purchase closing first – If you relied on the down payment money to come from the sale of your home and it hasn’t sold, you could be in a bind. You can consider a bridge loan. This temporary financing helps bridge the gap between when you buy your new home and sell your current home. Again, this is something you should plan for so if it comes down to it, you have the financing ready.
We know that in a perfect world, you would close on your new home and current home at the same time. Because there are so many parties involved, though, this is rarely the case. Rather than leaving it to chance, make sure you have all of your ducks in a row. In other words, make sure you have a backup plan to take place just in case your perfect scenario doesn’t work out. The more prepared you are, the easier buying and selling a home will be.