How to Buy & Sell a Home with Ease — Week 3

My 5-part series is a “how-to” guide for buying and selling a home with as little stress as possible.   Whether it’s your first time selling or you’ve done it before, this series is a great resource. This time around, you’ve got more to think about, plan, and coordinate than when you bought your first home.

It’s never simple when you’re ready to buy a new home and you have one to sell. 

It’s overwhelming just thinking about what comes first, what to do when, how to pay for everything, and how to time it all so you don’t end up with two homes or no home.

It can be both a logistical and financial dilemma!

First, you’ve got to deal with keeping your current home clean for buyers; and second, you’ve got to deal with financing this new home purchase. All of this has to happen all at the same time.

If neither is done properly, then your move can turn into a major headache and not necessarily helping you end up with the home you want.

That’s why I’m here to help explain how to make this all happen, step by step. And help lower your stress level at the same time.

Buy First or Sell First – The Real Estate Catch-22

Your decision on whether you will buy or sell first is a personal one.  But you still need to call in the experts to help with what & how it can be done.

Just like you, every single homeowner looking to move has a different set of goals based on finances, familial status, current home, and tolerance levels.

All of these can be a whirlwind of factors that your lender and I can help you sort out so you can make a decision on what will work best for your specific circumstances.

The first step in the process of figuring out whether you can buy or sell first is doing some homework on your own. Determine what monthly mortgage payment you would feel comfortable with for your new home? How much cash do you want to put towards the purchase? 

Start with the end in mind.  Ask yourself, “What do I want to write a check for every month for this new home?” Write that number down.  A range is fine.

Keep in mind that every $10,000 change to your purchase price only raises your monthly payment by about $40 per month (based on today’s interest rates), so a range to work within is actually better.  

2.)  How much cash do you want to put into your new home purchase?

Perhaps you’ve been saving so you can have a bigger home without a bigger monthly payment. Or, maybe you want to save some of the equity from your current home for some other purchase or for updates in the new home.  

Think about your total cash outlay for this next home.  Write that number down. Now write down where those funds are coming from?  Is all of it in your current home? It’s okay if it is. We just need to get it out before you can buy the new home, and selling your current home first is not always the way to do that.   

Do you have funds elsewhere?  Where? Are they liquid?  I have some tricks of the trade to help you get cash out of your home without selling or even getting cash out of your brokerage accounts without having to sell those assets either.  It’s a bit complicated, but I help clients do it all the time, so contact me to learn more.

For now, just write down how much cash you have in total, where it is, and how much you want to put toward your new home once everything is said and done.

Next Step … Working with Your Lender

With this information, your next step is to talk to a lender about these two items—a monthly payment on the new house and total cash outlay for the new house. Start your conversation with your lender about the monthly payment so you don’t get sidetracked with being approved for too much!

From there, your lender will run an approval and will ask for bank statements, pull your credit and most importantly provide you with a loan summary sheet.  This way you know what price you can be approved for on the new home. This number should be calculated by using your preferred monthly payment and the financial information given for the approval process.  

Two questions you’ll need to discuss with your lender at this time:

1. What amount are you approved for while keeping your current home? This is in case you want to buy a new home first before your current one sells (or maybe you can keep it as a rental, woohoo!).

2. What amount are you approved for if you sold your home first?  

The lender will be able to answer these questions for you.  It is derived from your debt-to-income ratio.

Essentially, can the lender approve you to buy the next home you want before you sell or not?  This can only be answered by your lender.

You may want to buy first so you can take your time and find “the one,” but only your lender can tell you whether that’s possible.  Now is the time to find this out.

When selling your home first before buying:

Once you have information from your lender, you may find out you will need to sell first before you buy.  If that’s the case, stay tuned for next week’s article in this series. It will explain how to do that step by step.

In the meantime, here are some factors you should keep in mind:

You might need to rent back your old home or find a place to stay in between homes. That’s why you need to be a cordial seller so that the buyers of your home may be willing to let you rent back for a period of time.

Once your home is sold, you have only a limited time to rent back. You may feel the pressure to make a quick decision on buying a home. Remember the goal here is to get the right new home for your needs, not just the one that’s readily available. There might be some short-term inconveniences but managing them will help you get the best home for your long-term needs.

Another option is to have a “sale of home” contingency on the new home you are buying.  Typically, the seller of your new home will look unfavorably on this contingency and may not accept it.  If they do accept this contingency, they often will not be as negotiable on price or other terms.

When you can buy first:

If your lender says you can buy before you sell, this is obviously preferable. You’ll learn exactly what you need to do when to make this happen in the final article of our series.

This is usually the easiest and less cumbersome way to make it happen, but not everyone has the financial ability to be approved to buy first.

In the meantime, here are some things to keep in mind if you buy first:

There are several different ways to get cash out of your current home or other investments you have.  I’m happy to discuss your options as it’s easier than you might think. However, it does take a little time and planning, so this needs to start early in the process, WELL before you start looking at homes.   

There’s no pressure and no need to rush the search for a new home. Take your time and look around for your next home.

You don’t need to move into the new home once you purchase it. Buying first can give you time to do renovations or even minor updating such as painting and replacing the flooring.

You will own two homes at once and could have double mortgage payments for a while, depending on when you sell your current home.  I can provide you with current market information to help you know how long you can expect it to take to sell your current home and what are the buying trends in today’s market as well.

Keep in mind with buying first you won’t have the exact amount of the proceeds from the sale of your current home. I will help by giving you a couple of scenarios so you can plan for the best case and worse case scenario.  

One of the services I help with in selling your home is free staging. You can move out of your current home and not have to worry about keeping it in showing condition. Staging a vacant home always helps it sell for a better price as it helps buyers visualize how the rooms look with furniture in them.

Moving Forward

Your lender and I will work together to help you know which option is best for you financially – buy or sell first. You must make a definitive decision before starting to look at homes so you can get all of the financial pieces in order.

This can be overwhelming and scary, I totally get it.  But, given my experience with just this type of experience, I can help you get it all planned out like clockwork.  Just know there is no one “right” answer, but the next step depends on your specific financial situation and goals.  

Contact me and we can set up an appointment to talk through the details and put together a plan specifically for you.  No two clients do it exactly the same but I can share examples with you of how other clients have done it to help you plan your next move.  

We’ll run through all the steps including the details in Part 4 and 5 of “How to Buy & Sell with Ease” which are still to come. So stay tuned to your email inbox for when those articles will be released!