The thought of buying or selling a home can be intimidating . . . the idea of doing both simultaneously can be downright overwhelming. Should you buy first? Should you sell first? Should you rent in between? With the recent impact of COVID, now more than ever, our clients are seeking the opportunity to upsize to larger spaces. Here are 4 steps we recommend to help guide you through the process:
1) CONTACT A LENDER
Before you make any major decisions on your home transition, the first and most important step to take is to speak with a lender about your options. There are various programs available to consider including a bridge loan or a HELOC. It will be important for you to understand all of your options prior to making an offer on a new home.
WHAT IS A BRIDGE LOAN?
A bridge loan allows you to make a non-contingent offer on a new home by borrowing on the equity of your current home. Sellers with the right amount of equity (the difference between what your home could sell for and your mortgage balance) could qualify for a low-cost loan with no monthly payments that becomes due when the current home sells. Through Windermere’s exclusive partnership with Vintage Home Loans, our sellers are able to buy first, vacate their current home and then sell, making for a seamless and stress free experience. A bridge loan typically takes 30 days to process and close.
WHAT IS A HELOC?
A Home Equity Line of Credit (HELOC) is a revolving source of funds, much like a credit card, that you can access as you choose. Like the bridge loan, a HELOC also allows you to make a non-contingent offer on a new property. The loan is secured against the value of your home based on the amount of equity you hold. The interest rate is typically higher than your standard mortgage, and you will be required to make monthly payments on the loan. A HELOC typically takes 45-60 days to process and close.
WHAT CAN YOU AFFORD?
As you explore loan options the final step will be to gain full approval on a new loan to purchase a home. Your real estate broker will provide you with a list price for your current home which will be important for your lender to have. Based on this information, they can review your credit history and income to determine what the budget for you new home will look like. Make sure to get a loan approval letter prior to shopping for the new house.
2) KNOW YOUR OPTIONS:
If you are in a tight real estate market such as Seattle, trying to make a contingent offer (making an offer on a home with the contingency that it will close once you sell your existing home) is nearly impossible when you want to compete in this market. So, you need to consider your options:
BUY BEFORE YOU SELL
If you have down payment funds saved up, or obtain a loan, you may be able to begin your home search now. Having the ability to buy first, then move into the new home in order to vacate the current home before selling, is the most ideal situation.
SELL BEFORE YOU BUY
It is possible you may not be able to qualify for an advance loan. When this happens, you most likely will need to sell before you buy. That said, living in a home while it is on the market, especially during COVID, greatly reduces your chances of multiple offers. If you are in a high demand market such as Seattle, you may be able to vacate the home for 1-2 weeks, sell, and then return home until closing. Consider staying with family, or a short-term Airbnb, or better yet take the mental health vacation you’ve been pining for. We love these unique and local recommendations from SeattleMet
RENT, SELL, THEN BUY
Moving is stressful, and living in temporary housing may not be an option, especially if you have kids and pets. This is when you should consider moving into a short-term rental. Not only will you have better selling results by vacating the property, but it will also allow for more flexibility and less pressure when it comes to timing the closing on a new home.
(You may notice that the biggest tip here is to vacate before you try to sell.)
3) PREPARE THE PROPERTY:
Once you have determined the best option, you’re ready to put your plan into action. Here are a few tips to consider while preparing the property:
MEET WITH YOUR BROKER
Have your real estate broker tour the home and help determine what updates or repairs are needed to give you the highest ROI (Return on Investment). Most professional brokers will have a list of vendors that can assist you with these projects.
DETERMINE LIST PRICE
Once your broker has done a walk through, they will provide you with a market analysis of the neighborhood, comparable properties, and a potential list price for the home. When considering a list price, it is crucial to listen to the market, not your heart. We all have a price we want, but that might not be achievable. Be realistic about what your home is worth so that it will sell quickly and efficiently.
STAGE THE HOME
Trust us, stage. It’s an expense but the return on investment is tenfold! In facet, Forbes.com reports that staged homes statistically sell 87% faster and for 17% more! Homes that are empty feel cold, not welcoming, and buyers are challenged with envisioning how to layout the rooms. Staged homes feel cozy, inviting, encouraging the potential buyer to stay a while and explore more.
HIRE AN INSPECTOR
In a fast market where you may only need a week to sell, it might be a good idea to hire a home inspector who can provide an inspection report to potential buyers. This not only reduces impact on the home with just one inspection instead of multiple, it allows for potential last-minute buyers to jump in with an offer. If you are on a public sewer line, it might be a good idea to have the line scoped (where they stick a camera down the entire line) and inspected. By providing a full home inspection report, buyers will be more likely to waive the inspection contingency and therefore you have one less loophole in your contract.
4) GO SHOPPING!
Now that you have researched your finance options and have a plan for preparing your home to sell, you are ready to get out and tour. Knowing what you are looking for in a new house and expressing the details to your broker will contribute to your success. We recommend a brainstorm session such as our Buyer Worksheet to help get you started. Download and print a copy for everyone in the household, then compare your results.
Buying and selling a home at the same time can be hectic and stressful, but hiring a professional full-time, full-service real estate broker will help ease much of this pressure. Make sure you choose to work with an experienced agent who has managed the upsizing process before. They will be the key ingredient to your success!