7 Steps To Selling And Buying A House At The Same Time
Moving to Akron Ohio Tips - 2021
Published February 2021
Are you in the position of wanting to buy a new home, but need to sell your current home first? Maybe you had a new child and need more space, or you're an "empty nester" and want to downsize to a house that fits your current life situation. Whatever the situation is, this article was written for you and I hope to answer all your questions. Watch the video below!!!
I’m not going to lie to you. This is a pain in the a**, so pay very close attention because I’m going to show you how to do this the right way. Doing this requires planning because the smallest hiccup could have you pulling your hair out, trust me... Timing and planning in real estate are the most important components to a smooth transaction and it’s because of expertise like this that I still have a job. If you find yourself in this position, YOU NEED SOMEONE TO HELP YOU WITH THIS. I’ve seen plenty of people who thought they could do it on their own end up wishing they never tried.
Let’s get started, shall we?
Step 1 - What do you qualify for?
First thing to do is to contact a mortgage lender to confirm that you need to sell your existing home in order to obtain financing to buy your next home. Some people are surprised that they DO NOT need to sell their current home to buy another one. If you are able to qualify to purchase a new home without selling your existing home, this is the best case scenario and offers tons of flexibility.
The reason this is so important is because of the timing and what you do in between closings. If you have to sell your existing home first and fully close on it, then this is where things have to line up perfect. If the timing is not lined up perfect, then you have to think about:
When you sell your existing house ALL of your stuff must be out more than likely for the new buyer to take possession.
Where do you put all your “stuff” in between?
Would you want to sell your existing house in the morning and close on the new one in the afternoon?
Do you need temp housing?
Do you need temp storage?
The best case scenario is putting your house on the market while actively looking for your next home. The goal here is to line up your closing of your current home with the closing of your next home. You could do a delayed closing on the property you're selling and include a delayed possession into the contract to line up the closing with the date of new property that you're purchasing.
Step 2 - Prepare a net sheet for your current home
Your real estate professional can create a net sheet for you. A net sheet will allow you to determine how much you'll make from the sale of your home, subtracting all your closing costs.
You should also get an idea of what your home will realistically sell for. Im sure you'll end up looking at Zillow's Zestimate or see what the neighbors house sold for, but these are all "Guesstimates". Tell your agent to provide an HONEST analysis of what your house is worth. Remember that the market ultimately controls the homes values, no real estate agent, investor, or home seller is going to 100% accurately dictate values.
The value your agent gives you should allow you to determine what your net proceeds will be after all closing costs. This will allow you to get an idea of how much of the proceeds you may be using for your next purchase. After receiving the net sheet, say you find out that you will NET $22,700. Knowing your net figure is SO important. What do you think is better?
Seller #1- My home should sell for $190,000. John and Betty john the street got $185,000 for their house.
Seller #2 - My home will sell for $195,000 and I will make an estimated $22,700 from the sale!! Now I can afford a bigger house since I have a large down payment.
Here are the fees associated when selling a house:
Real Estate Broker Commission 4-6% of the sales price
This number will give you an idea of what kind of down payment you will have on your next home. Now you can begin doing some homework for new homes now that you know what numbers you are working with.
Want to find out what your estimated closing costs are going to be? CLICK HERE
Step 3: List Your Home For Sale
You should list your house for sale with a true online marketing plan using proper pictures, video, and online positioning. At this time, you need to aggressively look for homes to buy right now since you will be needing to sell your existing home to buy a new one. The BIGGEST MISTAKE I see is putting an offer on a home, contingent upon your home selling... and your home isn't even on the market.
Look I get it, it seems counter intuitive to list your home for sale without having a home lined up to purchase, but I can tell you right now that a seller (98% of the time) will not accept your Contingent offer if your home isn't even listed for sale. Sellers do not like to accept these kind of terms since they have no idea how long it will take for you to get a buyer, or know the condition of your home, what is it priced at, etc. Having your home listed already shows serious intent and gives the seller a peace of mind.
Question: Would you feel comfortable accepting an offer from a buyer who has to prepare their home and put it on the market (gives you that uneasy feeling in your stomach, doesn't it)? Or would you wait a few more days and accept an offer without a contingency?
But Alex... my house is listed for sale, what if I want to accept this offer on my home from a buyer but haven't found my next home?! Good news, you can actually accept an offer from a buyer contingent upon you finding a home. There are "loopholes" we can go through by putting proper verbiage into the contract to protect you, but make a mistake and you could be locked into a deal that you don't want to be in. YIKES!!
The only time I would advise a seller to take a house sell contingency in this market is if you received an offer way too good to pass up!!! In other words, you as a buyer will most likely pay in some way, shape, or form for having a house to sell contingency in your offer. Sometimes you can pay for it with terms or sometimes with price.
NOTE: Sellers are able to show their home to other buyers when they accept a house to sell contingency, but in actuality buyer showings will strongly decrease as the status will be changed to contingent in the MLS. When this occurs many buyer agents and buyers overlook the property because of its status, which must be disclosed.
Step 4: Your House Is Getting Traction… Offer Coming Soon….
As your home is being shown to potential buyers your agent should get a grasp if an offer is going to come in or not. If you are receiving 10+ showings a week then you typically are very close to getting something. If showings are at a minimum, only 3-5 showings a week, it is likely that the house is over priced or marketing. In a strong sellers market and we don't have an offer within the first 21 days, we HAVE TO reevaluate the price and marketing.
Step 5: Accepting An Offer On Your House….
Once you receive a contract for the sale of your house, things start to happen. You want to negotiate a longer closing date with your buyer. Closing dates are negotiable and I recommend a closing no sooner than 60 days from the date of acceptance. The reason for this is two fold.
You must allow time to find a new home so you are not settling on anything. You also need time for your home buying process. You will do an inspection, apply for financing, and wait for that financing to be fully approved. Usually 30-40 days from a contract acceptance is more than enough to get this done, but can vary based upon which lender you are working with. Setting your closing date for 60 days from the time you accept a contract should allow you 2-3 weeks of house hunting time. As long as you find a house in those 2-3 weeks, you will still have 30+ days to close on your next home purchase!
The buyer needs to do their diligence on your house. Typically the first five business days of a purchase contract allow the buyer to do their diligence on your property. They will do an inspection and any other necessary diligence so they understand everything they are buying.
If you reside in a property with an HOA, they will request all condo association documents to make sure it’s in good status. After ALL potential issues are cleared, you want to be in full buying mode. This is important because if something is wrong with your house, or the buyer gets cold feet, they can cancel the contract during the contingency period. If this occurs then it would certainly affect your upcoming purchase. In a perfect world your buyer would have already done all inspections by the time you would be doing an inspection on your new home.
Step 6: Find Your New Crib And Get Contract Accepted!
Once your house clears inspection, it’s time to put your next home under contract. You should aim to have your home purchase under contract no sooner than 35-40 days from the anticipated closing date.
It’s very likely that you will sell your existing house in the morning and close on your home purchase in the afternoon if you are buying and selling in the same day. Your lender is going to need to make sure that your old debt has been paid off before they clear the funds to purchase your next home. Your title company will make sure this is all handled for you.
You only need to make the closing date the same day as the sale of your existing house if you are planning on selling and buying on the same day. If you have a temporary housing situation set up, then the timing is not as crucial, but if not... you want to follow this plan exactly. You could also see if the buyer on your property would be willing to lease it back to you for a few days so that you can close and not feel rushed. This is what I recommend and is pretty typical.
Make Sure Lender Has Everything They Need
This is not something you can procrastinate. You want to be as proactive as possible with your lender. A good real estate agent will also help you with this and should be staying on the lender to make sure your file has an appraisal ordered and gets into underwriting immediately. Underwriting is the process your loan gets submitted through once your lender has everything they need.
Make Sure Your Buyer’s Lender Is Doing Everything On Their End
One of the ways to blow this up is if your buyer’s lender decides to take a nap. You want to make sure your buyer’s lender is doing their job. The appraisal should be done within the first 10-14 days after you accepted the contract.
You also want to make sure their file is in underwriting shortly after the appraisal takes place. Your buyer will have a mortgage contingency in their contract. This means that the contract is contingent upon securing financing by a date specified. This date is referred to as the mortgage contingency date. This means that your buyer will have received a clear to close from their lender by the date specified. That date should be no later than 35-45 days from your acceptance of your sale (considering you have a 60 day closing). This will allow your buyer’s financing to be 100% approved 2 weeks or more before the closing date. This ensures no last second hiccups because you can always count on one. I like to mitigate as many “what if’s” as possible.
Step 7: Close And Close
I think now you can see how much coordination goes into planning a sell and purchase of a house. There can be a lot of moving parts especially if the person buying your house is in the same situation as you are! Planning ahead of time with a good strategy will help avoid any headaches. I would be lying to you if I said it was 100% stress free... because it’s not. However with the right team in place you can plan this the right way. I hope this article helped you understand how to sell and buy a house at the same time.