Are you ready to buy a new home, but have not yet sold your current residence? If so, you’re in the same situation as many Huntsville homeowners, and you need to begin the complex process of buying and selling homes at the same time. Though the process of synchronous selling can often be a stressful one, you can make it easier by pre-planning for possible scenarios. Here is how to navigate the process of selling and buying a home simultaneously and tips for each possible scenario.
Deciding if You Can Afford to Buy and Sell at the Same Time
Before you begin the process of buying and selling Huntsville townhomes or houses, you need to do a deep dive into your finances. Among the questions you should ask yourself when investigating your financial situation are:
◾ If you are not able to access the equity in your current home, do you have enough cash saved for:
▪️ A down payment?
▪️ Major repairs on your new home?
▪️ Moving costs?
◾ How long can you make two mortgage payments before it starts to have a major negative impact on your finances?
◾ If you have to pay for expenses with cash and make two mortgage payments for a significant amount of time (which is a highly unlikely scenario in today’s severe listing shortage crisis), will it have a large impact on your ability to save for an emergency fund or retirement?
Ultimately, having a conversation with a mortgage lender will provide you with the clarity you need to make an informed decision. They will be able to analyze your finances, debt-to-income ratio, and determine if you qualify for a loan without the cash proceeds from your current home. Ask your real estate agent for some trusted lender recommendations - they will ensure that you are in the right position prior to making any big decisions. If you’re not, you may want to wait to buy until you sell your current home or hold off on the entire real estate process until you’re in a better financial position.
Selling Your Existing Home Before Buying a New One
The Huntsville and Madison areas, as well as nationwide markets, are currently experiencing a strong seller’s market, which means there are more prospective buyers than there is housing inventory. While this is encouraging news for sellers, it also means you’re likely to sell your current home before you find a new home you’re interested in buying - likely in a matter of days when priced strategically. Not having a place to live can be very stressful, but there are some short-term solutions to fill the gap while you look for your next home.
◾ Secure a short-term rental. Ask your real estate agent to connect you with homeowners who are renting out homes in the Huntsville area. Many landlords will consider a short-term rental situation of several months while you continue your home search. Airbnb is another avenue of finding short-term rentals.
◾ Ask about leasebacks. It’s possible that the person you sell your home to is also in a synchronous selling situation. If so, they may consider a leaseback arrangement where you rent the home you just sold them for a short period of time while they attempt to sell theirs, and you look for a new one. Keep in mind, leasebacks are typically negotiated during the initial offer stage and need to be agreed upon before the home closes.
◾ Rent a storage unit. Whether you’re moving into a rental, staying with family or friends, or renting your own home as a leaseback, having a storage unit is helpful. It can help you reduce clutter and facilitate the moving process during your transition.
By selling your home prior to identifying your new one, you put yourself at a significant advantage when making offers. In the current market where multiple offers are the norm, offers that are contingent on the sale of a home are typically seen as less desirable and have a low chance of acceptance. By selling your home first, your offer will be seen as competitive and clean.
Buying a New Home Before Your Current Home Sells
Though selling your home before finding a new one comes with a few challenges, the more stressful situation is usually buying a new home and then finding you can’t sell the one you already own. If this happens, a precarious financial situation can occur as you attempt to come up with a down payment and pay for other expenses. Here are some options:
◾ Get a HELOC. A home equity line of credit, commonly known as a HELOC, is a revolving line of credit that is secured by your current home. The interest rates on these loans are typically lower than other types of loans if you have a low debt to income ratio and a good credit score. You can also choose how much money you take out with a HELOC and only have to pay interest on the amount you use.
◾ Sell assets. If you don't have the cash to put down on a new home in Huntsville, you can sell stocks, bonds, or tangible assets like precious metals, luxury jewelry, or classic cars.
◾ Perform a cash-out refinance. With the low mortgage interest rates, a cash-out refinance may be your best option when it comes to making a downpayment on your new home. This type of program pays off your entire primary mortgage and lets you take out a new mortgage for more than what you owe on the home. You get the difference back in cash which you can then use for a down payment and expenses.
The other challenge when you buy a new home before you sell is logistics, as you will technically own two homes. To help make your mortgage payments, you can consider renting out your current home either short or long-term or offer the seller of your new home a leaseback if they have not yet found a house in Huntsville they are interested in.
If you are attempting to buy and sell Huntsville homes, condos, or townhomes at the same time, it’s important that you work with an experienced local real estate agent who has handled situations like this in the past and has a clear strategy. Your agent will be able to help you effectively market your current home, locate homes you will be interested in purchasing, and walk you through the offer, closing, and possible rental or leaseback processes.
Ready to begin your journey of synchronous selling? Reach out to Huntsville real estate agent Nicole Hartenbach and the entire InTown Partners Real Estate Group. Nicole and her team will act as your guides throughout the buying and selling process and help lessen the stress - no matter which scenario you find yourself in.