A guide to selling your home to buy another.
Sooner or later, homeowners find themselves wanting or needing to move to a new home. To accomplish this, most of them buy and sell both homes at the same time. But how does that work? Buy first then sell? Sell first then buy? Where does one start?
Done correctly, buying and selling at the same time can be seamless, having just the right amount of time to properly negotiate both transactions and close on time. However, these transactions have the potential to be very difficult.
Before we get into the details of buying and selling a home at the same time, lets first discuss some of the different options we have when selling their home with the intention of buying another.
Options when Selling to Buy
Selling to buy can be done in a few different ways. The best way will vary depending on your specific situation, but homeowners usually opt for one of three options:
- Sell first, rent, then buy
- Buy first, then sell
- Buy and sell at the same time
Lets take a look at the pros and cons for each of these:
1: Homeowner has the time to sell their current home now and rent before purchasing again.
- Only one transaction/escrow at a time
- Less stress
- Requires an additional move when you buy your next home
- Requires a lease agreement (12 months usually)
- More time
- More money
2: Homeowner has the means of carrying two mortgages and opts to buy the new home first then sell the old home after moving.
- Only one transaction/escrow at a time
- One move
- Less time
- Less stress
- A lot more money
- High income required to carry both mortgages simultaneously
3: Homeowner sells and buys simultaneously
- Only one move required
- Less time
- Less money
- Requires two simultaneous transactions/escrows
- Can be very stressful
In our experience, most homeowners prefer option 3 and avoid the expenses of paying for multiple moves and all they come with, and that is what we will be focusing on in this post.
Moving straight into your new home saves money on movers, storage rentals, time, and several other intangibles that would otherwise be dealt with in multiple moves within a short period of time.
Although the process can get stressful for some, experienced agents, such as Karen Anderson & The Prestige Team, can make the process nearly painless. This leads us to our first step in the process, choosing an experienced agent.
Choose an Experienced Agent
Choosing a real estate agent that knows your market and has experience with contingent sales is one of the most important decisions you will make in this process. An experienced agent will have a significant advantage in problem-solving and negotiation situations that a newly-licensed agent may not yet possess.
The home buying process, which typically takes 30 days or more, is already a complex process. When you add selling your home to the mix, things can get very frantic rather quickly.
Working with an agent that is well versed in these types of transactions can be vital to the success of your move. Not only do you want you agent to know the actual selling-to-buy process, but they must also be able to help prepare your home for market and identify the strongest buyer possible to ensure we have a solid foundation for the transaction.
Preparing your Home For Sale & Finding a Buyer
Preparing your home for sale is an essential part of the selling process. When selling, we want to make sure your home is as close to perfect as our resources will allow. If proper care is not taken to show your home in its best light, it could result in a stagnant listing, regardless of market conditions.
Some of the things we do to prepare your home for the market include suggested repairs/upgrades, property staging, professional photo and video, 360° virtual tour, targeted print ads, targeted online marketing, and more! Visit our Preparing Your Home For Sale post for more details.Karen Anderson
Once your home is on the market, we can start showings and hopefully receive offers. In this current seller’s market, we should have significant leverage on the sale as long as we are priced and presented well. In situations where we receive multiple offers, we can negotiate, amongst other things, a longer escrow to buy us more time to find your new home – further improving the chances of closing both escrows!
Once we have a buyer secured, our focus can fully turn to searching for your new home.
Searching for your New Home
As with all buyers starting their home search, getting pre-approved for a loan is one of the first things we do, way before listing your home for sale. When selling to buy, it is critical to know what your purchasing power is so we can establish a budget. Getting pre-approved early will also will give plenty of time to make any needed credit improvements prior to purchasing the new home.
Once your budget and criteria have been established, showings can begin and hopefully offers soon after.
As a contingent buyer in a competitive market, having your house in escrow can mean the difference between getting into escrow and getting a rejection. A listing agent will always look at contingent offers carefully to see if the buyer’s current home is in escrow, and if that buyer has released any contingencies. If the buyer’s home is not in escrow, or even listed, that offer usually goes to the bottom of the pile because of the added risk, and this is why we always focus on getting a buyer for your current home first.
Once we locate your home, and hopefully have a buyer in escrow on your current home, its time to submit offers and get into escrow(s)!
Getting in 2 Escrow(s)
Getting both your homes in escrow is a huge accomplishment, but the battle is only half over. Managing two escrows at the same time can make any homeowner’s head spin, but we have the experience to guide you through the process with the least amount of stress as possible.
Once we have both homes in escrow, things can start to fall into place, such as timelines inspetions, appraisals, etc.
The two transactions/escrows can be somewhat hard to comprehend, but we have simplified it in the bullets below:
Escrow A: The Sale | Your Current Home
- Party 1: You as the seller
- Party 2: The buyer for your current home
Escrow B: The Purchase | Your New Home
- Party 1: The Seller of your new home
- Party 2: You as the buyer
As previoulsy mentioned, getting to this point is only half the battle, the other half is negotiations and removing contingencies.
Negotiations & Contingencies
The key here is making sure everything happens in a timely manner and contingencies are being removed as agreed to in the Purchase Agreement. Inspections, repairs / credits, appraisals, loans, etc. on both transactions have to be completed and negotiated successfully for the transactions to close. All it takes is one disagreement or failure to perform from either of the four parties involved to end up back at square one; either having to find a new home to purchase hoping you don’t lose your current buyer, or having to find a new buyer hoping the seller on your purchase does not cancel.
This is why these transactions can be stressful and difficult. But remember, a contingent sale means you are not obligated to sell if you can’t find a replacement, so at the very least you will not be homeless!Karen Anderson
In the unfortunate event that we fall out of escrow on one end, we always have a backup plan; either with a backup buyer on the sale or other potential properties that could work for the purchase. Doing so will give us a chance at salvaging half of the transaction, and often that is something we can accomplish in order to successfully close successfully.
If all goes well with negotiations, once contingencies are removed by all parties things become much more concrete and everyone tends to relax a bit. At this point, we typically have solid dates for closings and can start scheduling movers, as all parties are in agreement and ready to close.
Are you considering a move?
Whether you’re just starting to consider the idea or have made up your mind, we would love to discuss your home and what it could honestly sell for! See below for services we provide to our sellers at no extra charge!
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