(As seen in the January 25th, 2015 issue of The Boston Globe)
Buying a new home before selling your current one can be a daunting proposition.
Homeowners need to weigh the risks and remember what is most important: getting the most money for your home and buying the property you truly want for the lowest price you can.
The days of bridge loans and, for many, lenders who allow you to buy before you sell are pretty much over — and have been since about 2007. Many homeowners simply cannot qualify until they sell their current home. When sellers hear that they often say: “But what if I can’t find the home I want? I can’t list my home until I find the home I want to buy!”
As a result, some get caught in a vicious Catch-22; they stay in their current home for a long time because they are afraid to take that leap of faith — the faith that they will find the home they want once they get a buyer for their house. Some sellers ask: “Can’t we just make an offer on a house and tell the sellers we’ll list our home right away if they accept?” The answer is yes, of course you can try, but nine times out of 10 the sellers will reject your offer. The only time we see an exception to this is if the buyer is willing to pay more than anyone else, and even then the sellers are unlikely to accept because of the risk on their end.
The correct steps to selling and buying a home go like this:
1. Start searching for your new home in earnest and try to really narrow down where you want to buy
2. List your current home
3. Get an offer on your current home
4. Then, and only then, make an offer on the home you want
Sounds scary, doesn’t it? But this is actually the best way to go about it. It is the exact order in which most people do it.
There are some steps you can take to protect yourself and decrease your chances of having to find temporary housing:
1. Research where you want to live, so when the right house comes on the market, you can jump
2. Add a disclosure on your listing that says any sale will be “subject to seller finding suitable housing” (We do not recommend this option, however, because it will turn some buyers away)
3. When you receive an offer at a price you are willing to accept, there are steps you can take to buy the time you need to find the house you want. You can set the closing date as far back as possible, preferably 90 days. You can negotiate a clause that says the sale is subject to you finding suitable housing. Or, you can offer to pay the buyer rent for a certain period of time.
Be sure to consider the time of year. This process can be done in any month, but winter is probably the best time to start. Why? If you list in the winter, when the inventory is lower, you will sell for more. By the time you need to find a home and make an offer, it will probably be spring, when the housing market starts to heat up. Of course, hiring an experienced real estate agent who has successfully completed these kinds of transactions is key to having this all come together.
We understand that this is nerve-racking for homeowners, but it is impossible to eliminate every risk when conducting a real estate transaction. If you cannot buy before you sell, then you simply should list first. There is a chance that you will not find what you want and be forced to rent or live in temporary housing. In our experience, however, we see this happen less than 10 percent of the time.
It is a leap of faith, but one worth taking to get the house you want.
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