Selling, Buying & The Awkward Time In Between
In today’s market, selling your home should be easy and relatively quick (if it is priced right). Buyers are out in numbers and inventory is low, placing us right in the middle of a strong seller’s market. However, if you are also planning on buying a home, you will be competing with many buyers to find your replacement property and probably will have some difficulty aligning the closing of escrow on both homes for a seamless move from your current home to the new one.
As you think about this big move, you have probably wondered about the best way to transition from one home to another and how to manage the timing of it all. Do you buy the new home first and then sell your current home, or sell first and then buy? Do you rent during the interim or try to time the sales perfectly so that you can move directly into the new home? .
Here is a basic summary of the options that are available to you:
Option #1: The Seamless Transition – This is of course the ideal situation, when you close on the sale of your current home at the same time (give or take a couple days) as the closing of your new home! This involves only one cumbersome moving experience and no interim rental. This is of course very difficult to time and rarely happens. Furthermore, it requires the purchase of your new home to be negotiated contingent on the sale of your current home. In a “Seller’s Market,” it is difficult to get sellers to agree to these contingent offers.
Option #2: Sell First, Buy Later – This is perhaps the most common situation where most people find themselves in today’s unique market. Many times, this approach is necessary, as many people need the equity from the first house to pay for the down payment of the new home. When this happens, usually there is an interim time between close of escrow on the first home and the time you close on your new home. This can be a couple weeks. Sometimes it can be a few months or more. This leaves you with the options of staying with family or friends, renting a short-term interim space, or negotiating a rent-back situation with the buyers of your current home. The latter is often the most appealing of the three, as you only have to move once and you can sometimes negotiate a better than market rental rate for the extra time you stay past the close of escrow. However, if a “rent-back” situation is not available, then the only option is moving into interim housing – family, friend or rental.
This strategy does have some positive elements as it may help you to present stronger offers on the purchase of the new home. You can write offers that are not contingent on the sale of your current home and you will have the full equity in cash from the sale of the first home to put toward the new one – strengthening your offer and negotiating position when competing with other buyers. Finding a place to live in the interim can also give you the time you need to really find the house you want – less rushed than trying to sell and buy simultaneously.
Option #3: Buy First, Sell Later – This option usually only works for those that can qualify for the loan on the new purchase while maintaining the loan on your current home (or those that are purchasing new home with all cash). The benefit of this is that you have time on your side. You can buy at your leisure, fix up your new property before you move in if you like, and choose a time to sell your current place that is convenient for you. It is then easier to clean, stage and prepare you home for sale once you have already moved on to your new place.
**There are other factors that contribute to timing as well, and as you can probably see, everybody’s individual situation requires a unique approach to the issue of timing! Moving is always a stressful event in our lives, but good planning, quality advice, and a good agent that works hard for you will help make the transition as smooth as possible! : )
– Justin McNabb, Realtor