More than 71 percent of home sellers look at homes for sale while their current home is on the market, according to a 2017 Zillow report. Looking back, 24 percent of them said they wished they would have started the selling process earlier.
Most of these home sellers ran up against a common problem: Should I buy first or sell first?
Let’s take a look at just some of what you should consider and a couple of solutions.
Current market conditions
In a seller’s market (when there are lots of buyers looking for homes but few homes available) you’ll most likely not have to worry about the home selling. But, once it does, you’ll be joining the ranks of all the other buyers, competing against one another for the few homes on the market.
For this reason, many home sellers choose to rent for a time after selling, until the market changes in their favor.
Others can’t stand the thought of having to pack up and move yet again. Determine your tolerance for this scenario.
If you don’t have a large cash reserve, you’ll need the equity in your current home to purchase your new one. This means you’ll have to either sell your current home before buying or choose from among the other options we outline below.
The two-house payments conundrum
Another major concern we hear from our listing clients is that they’re afraid that if one side of the deal concludes before the other, they’ll be faced with having to make two house payments.
If your budget can tolerate this eventuality, then you’ve nothing to worry about. If not, read on.
Solutions to consider
Luckily, you have several remedies to choose from when faced with the “should I sell first or buy first” question.
A bridge loan is a short-term loan that provides instant cash flow. They’re typically only provided to borrowers with high credit scores and low debt-to-income ratios.
Learn more about bridge loans at Investopedia.com.
The Home Equity Line of Credit, or HELOC for short, offers a way for you to get at all that equity you’ve built up in your current home. This is money you can use to buy the new home and then you will pay off the HELOC with the proceeds from the sale of the current home.
There are several disadvantages to using a HELOC to come up with the money for your next home. Speak with your lender and financial advisor about this option.
Borrow against your 401(k)
Ask financial experts if borrowing money from your 401(k) to come up with the cash for your new home is a good idea and you’ll get one of two answers: “Sure” or “No way!”
The latter camp includes pros who remind you about the fact that you’ll be losing the compounding benefits of your invested money. The former group will tell you to go for it because real estate is an amazing investment and, besides, you can pay yourself back.
Again, please speak with your financial planner before deciding on this option.
Negotiate with the buyer
It’s always worth it to attempt negotiating certain contract terms with the buyer of your current home.
Ask the buyer for a longer escrow, such as 90 days, to give you time to house hunt for the next home. You might also ask the buyer to consider renting your home back to you after the sale closes. Offer a healthy security deposit and agree to pay above-market rent to cover their mortgage payments, if necessary.
There are disadvantages to the rent-back scenario, so run this idea by your attorney.
Although it is often challenging, a simultaneous close is a common way of dealing with buying/selling. This type of transaction times the close of both transactions (the sale of your current home and the purchase of the next home) to occur simultaneously.
Yes, there are dangers in this option, especially in the hands of an inexperienced real estate agent.
Whether to buy or sell first is a common dilemma and both have their pluses and minuses. We’re happy to discuss this with you in more detail; feel free to contact us.
Follow along on Social Media:
Check out the link below to continue your journey on one of our signature Suburban Excursion Tours.
Email me for your free copies of Westchester Magazine’s Best of & Ultimate Guide. Include: Name, Address, Phone, Email.
Introduction to Jennifer Y. Ross & The Westchester Living Team at COMPASS
Jennifer comes from Platinum Drive to Compass as an experienced agent. She epitomized Platinum Drive Realty’s motto “I grew up here. I live here. I sell homes here” and she is known for providing each of her clients with an exceptional experience guided by her expert local knowledge. She works tirelessly to ensure each of her clients has a professional, enjoyable and successful Westchester community & home buying search or selling experience. She often remains very friendly with her clients and welcomes the opportunity to be an ongoing resource as they settle into Westchester Living. Every step she takes will embody her core principals; integrity can never be compromised, clients’ interests always come first and character, commitment, and passion truly matter. For her buyer clients, Jennifer looks forward to the opportunity of being “Your NYC to Westchester” guide and real estate broker. For her seller clients, Jennifer is proficient at implementing an aggressive marketing strategy in order to obtain the best price possible in a highly efficient and seamless manner. Jennifer thoroughly enjoys assisting buyer clients in navigating the landscape of the Westchester residential real estate market. She is skilled at enabling clients to define where they see opportunity & facilitating the process from initial search through closing. Jennifer was awarded the Platinum Drive Star Award for Outstanding Performance in Sales & Client Services in 2014 & Platinum Drive Realty’s Superstar Award for Excellence in Sales and Client Services 2015 & 2016 for her outstanding performance in sales and client service. In addition to her passion for local real estate, Jennifer has a firsthand understanding of home renovation and new construction. Upon moving from NYC to Scarsdale, she and her husband performed an extensive renovation on their first home. After completion, they moved onto their second project in Larchmont, a full house renovation and expansion. More recently she is active with local developers who specialize in new home construction, home expansions and renovations. Jennifer has the ability to understand a home’s full potential and can help clients find or create their dream home. Jennifer was the Manager of Platinum Drive Realty’s Larchmont Office. Jennifer was raised in Scarsdale. After graduating from Scarsdale High School, Jennifer received a BA in Child Study & Sociology from Tufts University and an MA in Language & Literacy from New York University. Jennifer currently lives in Larchmont with her husband, Michael, and their three sons, Braden, Devon & Zane. She specializes in communities in Southern Westchester with a concentrated focus on the Sound Shore Communities of Larchmont, Mamaroneck, Rye Neck, Rye, New Rochelle as well as her hometown of Scarsdale. Prior to real estate, Jennifer was a teacher in the Mamaroneck Public Schools. Jennifer has a deep understanding of the local school systems and the needs of young families.
Professional Associations & Accreditation
Jennifer is a Licensed Associate Real Estate Broker & has her Accredited Buyer Representative designation (ABR) and her Seller Representative Specialist designation (SRS). Jennifer is a member of the Hudson Gateway Association of Realtors & the National Association of Realtors. Jennifer’s
Jennifer Facebook Page: facebook.
Jennifer’s #FromNYCtoWestchesterLiving Facebook Group
Jennifer’s Instagram: instagram.com/TheWestchesterLivingTeam