Want to buy a new home, but need to sell first? Planning and timing are critical to a smooth transaction, here are 7 steps to accomplish it.
Planning and timing are critical to a smooth transaction, when you want to buy a new home, but need to sell first, here are 7 steps to accomplish it.
1: How Much Do You Qualify For?
Get in touch with a your preferred lender to make sure that you need to sell your present home in order to get financing to buy your next home. You may be surprised to find that you don’t have to sell your home to buy another one. If you do qualify to buy a new home without selling your the one you are living in, you will have more options open to you meaning more flexibility.
2: Have Your Realtor Prepare A Net Sheet For Your Home
A net sheet will let you determine net figure you will put in your pocket after deducting all your closing costs when you sell your home. You will also want to get your Realtor to give you a good idea of what your home will realistically sell for (Don’t count on Zillow). Get a good Comparative Market Analysis. Remember the market is going to dictate the price of your home, not what you want or you need,. The amount you net will be determined by that realistic sale price and then deducting all of your closing costs. Now you will have a good idea of how much cash you have to use for the purchase of your new home, figure out how much of that can be used for a down payment.
3: List Your Home For Sale
Now your ready to put your home on the market. Start researching what is available in the online in the area you want to live in to familiarize yourself with what is available . Now is not the time to fall in love with a new home, it may not be on the market when you are ready to buy.
If you find a home you want to buy and yours is not under contract yet you would have to make a contingent offer, this means that your contract to buy your new home is contingent upon you finding a buyer for your house. Most sellers will not accept these contingent offers since they don’t know how long it will take for you to find a buyer. What if you’re home is overpriced or doesn’t sell?
Look at it from a sellers point of view. If they accept a contingent offer not as many buyers will be looking at their house, and if your doesn’t sell they could be missing out on time on the market and other potential buyers.
If you already have your house under contract that presents a different story, then you can start shopping.
Sellers are much more likely to accept an offer if your house is already under contract with a willing qualified buyer.
4: If Your House Is Getting lots of showings you may have an offer Coming Soon.
If you are getting 5-7 showings a week then you should be very close to getting something. If you are getting more than 10 showings a week chances are very good you will get an offer soon. If you are not getting any showing, than either your marketing or price is too high or your marketing is not working. It’s usually to high a price and you it’s most likely time for a price change before your home sends to much time on the market.
5: You Accept An Offer On Your House
Now that you have a mutually accepted offer and a contract to sell your home youare ready to ger serious about finding your new home.. You will want to negotiate a longer closing date like 60-90 days from the date of acceptance.
There are 2 big reasons for this.
1. You need to allow time to find your new home so you don’t end up settling on something you aren’t excited about. Buying your new home takes time. You need to have an apply for financing, have an inspection, and then wait for your financing to be fully approved. With new government regulations for lenders starting in October 45 days from a contract acceptance is being recommend, but this can vary based upon your lender. If your closing date is 60-90 days from the time you accept a contract, that should allow you about 3 weeks of time to find a new home. If you find a home in those 3 weeks, you still have 45+ days to close on your next home purchase!
2. The buyer of your home needs to do their due diligence. Here in Washington your buyer will have 10 days to do an inspection and any other due diligence so they know everything they are buying. If you are part HOA, buyers will request all association documents to make sure it’s in good standing and they can abide by the ccr’s. If the buyer doesn’t like something they can still walk away from your house, they can still cancel the contract. If that happens then it would surely affect your upcoming purchase. In the best case scenario the buyer would have already done all their inspections before you have an inspection on your new home.
6: Find Your New Home And Get Contract Accepted!
When your buyers clears the inspection on your home it’s time to get your new home under contract. You may have simultaneous closing or are closing both house on the same day. Your lender will need to be sure that your old loan has been paid off before they will clear the funds to buy a new home. The title company will handle all the details for you.
The timing is not as critical if you have some temporary housing situation set up, but if not you want to follow this plan exactly. Another option would be to see if the buyer on your home would be willing to lease it back to you for a few days so that you can close on your new home without being rushed.
Be Sure Your Buyer’s Lender Is Taking Care of Everything On Their End
You’ll want to be sure your buyer’s lender is taking care of all the details on their end. Make sure their appraisal is done as soon as possible after the inspection..
Your buyer will most likely have a mortgage contingency in their contract, meaning that the contract is contingent upon the buyer securing financing, in our contract here in Washington this is usually a 30 day contingency, after day 30 it gets complicated, the seller than has a right to give the buyer a notice that they can cancel the contract any time within 3 days of giving such notice, unless the buyer releases the contingency. Your buyer will receive a clear to close from their lender before closing. In a perfect world you want your buyer’s financing to be 100% approved 2 weeks or more before the closing date.
7: Close on Both Houses
You can see the amount of coordination and planning it takes to a sell and buy a new home. There is a good chance of lots of moving parts. Good planning will help avoid problems.