Sell Your Old House First, or Buy a New One?

Sell Your Old House First, or Buy a New One?

"Upsizing" or "Downsizing" buyers face a quandary. If they place their current property on the market first, they'll miss out on a lot of potential buyers.

If they put their house on the market, it may sell, but they may subsequently be unable to locate the items they need. It's also possible that buyers may miss out on a dream house because their old one doesn't sell fast enough or the seller is unwilling to wait for it to sell. What is the most effective strategy?

Alternatives

We've seen it time and time again: there's no such thing as a "correct" response. Another example of this may be seen here. Finding out how some of the alternatives could work for you can help you figure out how to go from where you are now to where you want to be.

Personal Preference Clause

Let's imagine you decide to place your house on the market first because you want to know how much money you'll have to work with before you begin your renovations. You (or your Realtor, if you have one) may put it up for sale with the condition that settlement is subject to your finding the house of your preference.

Typically, a "home of choice" clause lasts for thirty days, but I've seen periods of time as long as sixty, ninety, or even a hundred and twenty days. "Settlement hereunder shall be dependent for up to sixty days on the seller's discovering and negotiating to purchase the house of his choosing," is a common phrase in these kinds of agreements. As a result, you'll have a little more breathing space.

A Personal Loan Against Equity in a House

Before putting your house on the market, consider getting a home equity line of credit (also known as a HELOC). Downpayment and closing fees for the purchase of a new house may be covered by the equity in your current residence.

Shop for a new place and sign a contract depending on the sale of your current one. The contingency may be removed if the seller refuses to accept it or if you are competing with a bidder who does not have a "sale of house" condition.

As soon as you got a non-contingent contract to buy, you'd be rushing to get rid of your previous house so you wouldn't have to worry about paying two mortgages. The previous mortgage payments might be met with the borrowed funds for a few months, so it's possible that you won't be put into any financial hardship.

Starting with a loan from your home equity does not bind you in any way. It just provides you with additional choices.

A Loan to Get You Through Tough Times

Let's take a look at a different case. Let's assume you decide to place your current house on the market and then seek out a new one. You (or your Realtor) begin the marketing of your home for potential buyers to see it. With so many people interested in your house, you're certain that a deal will be struck shortly.

For your new house, you decide to conduct some "preliminary shopping" to get a feel for what's available. Before you sign a contract, you locate the "ideal" house and "fall in love" with it. A contingent contract is not acceptable to the seller. What are your options if you don't want to miss out on this house?

Getting a bridge loan to purchase the house of your dreams isn't cheap, but it is possible if you have excellent credit and substantial equity in your current residence. Bridge loans often feature a high interest rate and a six-month term. In most cases, they may be extended for a second six-month term. You may often borrow up to 80% of the equity in your current home in order to raise the down payment you need in this manner.

As usual, there are several options. Only a few of them have been mentioned here. You may wish to speak with a lender to find out exactly what you can afford. The concepts presented in this article may serve as a jumping-off point for the discussion. In the end, who knows what will happen? This might be the first step in creating the ideal approach for you.

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