Welcome to Denver Boulder Living! My name is Renee Sobering,, and I serve the amazing people of the Denver / Boulder area in the beautiful state of Colorado! Today, we’re talking all about how to buy a home while selling your current one.
A couple of years back, we had a client who HAD to sell his property in order to get the down payment for his next home, which was a new-build. New builds don’t always have a completion date that is set in stone, so…. we decided it would be ideal to find a way to keep some flexibility in the closing date and possession date of the sale of his home. Since it was such a strong sellers market, we had no problem finding a flexible buyer who allowed our seller to lease back his home until the new build was ready, and everything went relatively smoothly considering that the new build went about a month over on construction. 😲 Had we not structured the deal properly, our seller could have been forced to move multiple times while waiting for the new build to be completed or may have been financially obligated to a long-term lease while paying his new mortgage.
Most first-time home sellers never think about how tricky this process can be… Until they do it. Buying a new home while you’re still living in your current home can create a long string of dominoes. If one of the dominoes fails to tip over in the line, the whole thing falls apart. So in this episode, I’m going to walk you through it, to ensure that all the pieces come together easily for you!
Here are the 4 ways you can buy and sell a home simultaneously:
#1 – Closing Contingent:
Many homes are sold on a contingency. In this case, you would put an offer in on a new home that obligates you to buy it only if someone buys your home.
This is a great choice for someone who has a home to sell because there’s very little risk. In essence, if your buyer falls through, then you reserve the right to back out of your contract as well.
The obvious drawback to selling a home contingent is that it transfers all the risk to the home seller, and most home sellers don’t want to assume that risk on behalf of their buyer. This is especially true if you’re trying to sell a home in a highly competitive market.
Think about it: If you had multiple offers on your home, five of them were contingent, but one of them writes a contract noncontingent, wouldn’t that one be more appealing to you? You see, most home sellers want a sure-fire deal. And contingency doesn’t fit the bill in these types of markets.
This is why some buyers will make every attempt to buy their new home without a contingency. The next 3 ways will show you how!
#2 – Own Both Homes:
This is a viable option if you can afford to carry two mortgages. In this case, you would get a mortgage on the new home, and wait to move out of your current home until you’re ready.
This process is helpful when you are turning your old home into an investment property and you’re planning to rent it out after you move into your new home. It’s also helpful when your new home needs major renovations, but you don’t want to move in until the renovations are complete.
The only drawback to this process is that you can’t apply the sale of the first home onto the second, which means that you’ll need to be approved for a second mortgage – while you’re still paying the first. You’ll also need cash for the down payment and closing costs on the second home as well.
#3 – Rent A Home:
There are two ways to do this: 1) Rent a random home, 2) Rent-Back your current home.
If you opt to rent a random home, this is pretty easy. You would simply sell your current home, then find a new home to rent until you find a new home to buy. But there are some definite drawbacks. It’s tiresome to move multiple times in a year, there may be heavy storage fees or pet boarding fees if you house things temporarily, and you may be obligated to a long lease if you find your new home earlier than expected.
The second option is when you rent your own home. This is called a rent-back or lease-back deal. In this case, you would stay in your current home after it sells by renting it back from the buyers. You would get all of the proceeds from the sale of your home, which gives you both the time and money to purchase a new home.
Of course, the big drawback is that it transfers the risk to the buyer and most buyers are hesitant to take the risk of renting their new home to you and prolonging their own move-in date.
# 4 – Close Non-Contingent:
This is a riskier option, but it’s still a viable one. In this case, you would buy the second home without being able to break the contract, if your home fails to sell. In this case, the home buyer assumes all of the risk – But in highly competitive markets, it may be the only way to make your offer stand out. If my clients are considering this option, I always make sure to let them know that there is a real chance of having to pay two mortgages at the same time if something doesn’t go as planned with the sale of their home, so that is something important to keep in mind.
Again, buying a home when you have a home to sell can be tricky business. Sometimes, there are transactions where 5 (or more) families are all buying and selling contingent, which creates a long string of dominoes. Orchestrating something like that is an art form and you need a good real estate agent who can guide you through that process.
The key to this process is COMMUNICATION!! Communicate, communicate, communicate! When there are so many moving pieces in a deal it is ESSENTIAL that your agent is CONSTANTLY communicating with everyone involved to make sure that things go smoothly. That is my job, and that is what TEAM SOBERING will do for you.
At this point, you may be convinced that you may need some guidance around the area of buying while selling. But you may also be thinking that you have no idea where to start. If you’re thinking about making a move, I can help you through the process. Call or text me at 406-697-4294. No pressure, no sales tactics, just the help and guidance that you need!
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