Sell first, then buy - Tips for a smooth home purchase
Written By Dian Hymer is author of "Starting Out, The Complete Home Buyer's Guide," Chronicle Books, Revised 1998. Copyright 1998 Dian Hymer Distributed by Inman News Features
Most homeowners need the equity from their current home to use for a down payment on the next home. Even when the cash down payment isn't an issue, many homeowners wouldn't dream of owning two homes at the same time.
In today's heated real estate market, well-priced homes are selling briskly. But markets can change quickly. One couple from Oakland bought their San Francisco dream home when the market was active. Then the real estate market stalled and they had difficulty selling the Oakland home. After numerous price reductions, the Oakland house sold but for much less than anticipated due to changed market conditions.
Why, you might ask, didn't this couple make their offer contingent on the sale of their Oakland home? In active real estate markets--where there are more buyers than there are sellers--this is usually not an option. However, you can often find sellers who will accept an offer that is contingent on the closing of a sale that is already in progress. So, if you need to sell first in order to buy, and you can't risk owning two homes, here's a game plan that works.
First, find yourself a good agent to represent you in the sale of your current home, and a good agent to find you a new home. Also, hook up with a good mortgage broker who can get you pre-approved for the mortgage you'll need to buy the new home.
Pre-approval is a formal procedure that gets you fully lender-qualified for a mortgage. The approval is contingent on you finding a home. Sellers are more receptive to offers from pre-approved buyers because there's no concern about whether the buyers will qualify.
Then meet with your listing agent and determine what you need to do to get your home ready to put on the market. Also ask your agent to prepare a comparative market evaluation to establish a reasonable list price.
At the same time, find out from the mortgage broker what price range home you can afford. Then have the agent who's helping you find the new home show you some listings of homes for sale that suit your needs. This will give you confidence that you'll find the kind of replacement home you want when you're ready to make an offer.
When the fix-up work is done, list your home for sale with a provision that you may need a long closing or a rent back option. A rent back option entitles you to rent your home back from the buyers for a period after closing. This gives you more time to find and buy the next home without having to make a move to an interim rental.
FIRST-TIME TIP: The best time to make an offer on a new home is after you have found a buyer for your home, and after the buyer's inspection contingency has been satisfied. Inspections often reveal defects that need to be corrected. Sometimes buyers and sellers renegotiate these repairs; sometimes sellers pay for items, like a new roof, that they hadn't figured into their budget. After the inspection contingency is removed, you know precisely how much you'll net from the sale of your home.
THE CLOSING: When you negotiate the sale of your current home, make sure that your buyers get pre-approved within 5-10 days of acceptance. Then when you make an offer to buy your new home, you can represent that your home is sold and that the financing and inspection contingencies have been satisfied.
“See What Brown Can Do For You”
Dwayne F. Brown, Realtor®/ Consultant /e-PRO®
9355 East Stockton Boulevard, Suite 210|Elk Grove, CA 95624
Cell 916-956-6061 | Office 916-405-5700| Fax 916-471-0138
|