For some people with enough funds and other houses to live in, selling a home and buying one at the same time can be relatively easy since there is not much pressure involved. But for those who need the equity from their old house to buy a new one, things can get quite stressful--especially so when they have no other place to go while trying to sell the house they're living in.
Most people caught in this situation have a number of options at their disposal. However, one must be aware of the factors that should affect his or her decision. Below is a guide on how to successfully pull off this feat, depending on what scenario you might be in:
Scenarios in which you have to SELL FIRST:
Scenario #1: You're in a seller's market in which you'll be caught in a bidding war for the house you want to buy.
In hot markets, it's unlikely for you to stand a chance in a bidding war if you make an offer contingent on the sale of your current home. If you’re up against multiple buyers, the best way you can stand out is to make a clean offer, with no contingency. Since you’ve already sold your home, you’ll have enough cash on hand to make this possible.
The game plan:
Find a reasonably priced rental with flexible terms, and stay there while staging your home to sell.
Once you sell your home, use the money to make a clean offer on the house you want to buy.
If everything goes well, you can move out of the rental in a few months.
Scenario #2: You'll be moving to a new city in a few months.
Whether it’s to start a new job, relocate with a loved one, or to accommodate any lifestyle change, you’ll be needing the money from your home equity to uproot yourself and start a life elsewhere. Besides, if you’re moving to a new city, it may be wise for you to rent a bit and explore different neighborhoods before buying your new home.
The game plan:
Declutter your home until it is adequately staged to sell.
Be sure to find a buyer who will agree for you to stick around for a bit until you're ready to move to your new city. You can either negotiate a longer period until closing or offer to rent back your home for a few weeks.
Find a short-term rental in your new city and use the time to begin your home search.
Scenarios in which you have to BUY FIRST:
Scenario #1: You're selling in a seller’s market, and buying in a buyer’s market.
It is easy to buy a house where the market is slow since there won't be too many people to bid against on the house you want. If you’re in a hot market, you can quickly find a buyer for the home you’re selling, so it’s improbable that you’ll be stuck with two mortgages for longer than you can practically afford.
In some cases, there won’t be anyone to compete with, and the seller may even accept an offer that is contingent to the sale of your home (also called a “contingency offer”). This way, you won’t have to worry about paying two mortgages at the same time.
The game plan:
Start staging your home to sell long before you plan to move out. This way, it can sell quickly once you put it on the market.
Make an offer on the house in the area you'll be moving to. If you’re making a contingency offer, negotiate a 30-day contingency period. If not, consider using an escrow account to secure the offer while waiting for your home to sell.
Put your house on the market once your offer on the new house has been accepted.
While this is highly unlikely to happen in a seller’s market, it is wise to consider a bridge loan if it takes you awhile to find a buyer.
Scenario #2: You have enough resources to make an offer NOW, even while your home for sale is still on the market.
Not many home buyers find themselves in this position, given that most people are only capable of making a down payment on a new home once they have already sold the previous one.
However, for those who have the money, consider these:
If you buy first, you can immediately move to your new home and have your previous home staged and presented in its most appealing state. If you do an impressive job on this, you can get an excellent offer on your home by marketing it vacant and ready for occupancy.
You'll only have to move once! No more looking around for a rental unit or storage space.
You can be more at ease knowing that you already have a home that is yours to stay in while dealing with the stress of selling your previous home.
The game plan:
Gather your funds from the sources you have in mind, and make a solid offer on the house you want to buy.
Move into your newly purchased home and stage your previous house to sell.
Once your home sells, pay back the accounts you've tapped by using the money you earned from the sale.
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Counseling Session Activities
- Prepare the buyer for executing a buyer representation agreement
- Explain agency relationships to the buyer and get state required legal consent to represent, if needed
- Inform the buyer of working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies
Building a Relationship
- Learn the buyer’s wants and non-negotiable needs
- Understand the buyer’s budget and what will be needed financially
- Help the buyer understand what property their chosen budget will buy
- Consider having the buyer fill out a homebuyer’s checklist
- Assist the buyer in examining how much they can afford to spend
- Provide quality lender resources
- Partner with the buyer to locate suitable properties for consideration
- Match the buyer’s needs with available property
- Constantly re-evaluate buyer’s needs and refocus property showings to fit those needs
- After ensuring the buyer understands what is done for them, how it is done,and the benefit to them, obtain signatures on the buyer representation agreement
- Explain how compensation is paid, who pays it, and what the buyer’s options are for paying it
Educating the Buyer
- Communicate the working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies
- Explain Federal and State Fair Housing laws
- Explain what to look for in applicable property disclosures
- Reassure the buyer that their personal information will remain confidential
- Inform the buyer that you will always disclose all known material defects
- In accordance with state law, provide information on checking the sex-offender registry and crime statistics for the neighborhood
- Discuss available resources that the buyer can check to learn more about prospective neighborhoods
Preparing the Buyer
- Explain the timeline for house hunting, mortgage approval, and closing
- Explain the local market and how it impacts the buyer
- Show statistics on what percentage of list price sellers in the area are currentlyreceiving
- Inform the buyer on what home features are popular
- Identify current average days on market
- Share the dangers of using the price per square foot to figure home values
- Explain the concept of absorption rate and how it impacts the buying process
- Indicate current listing months of market inventory
- Share estimated potential out-of-pocket costs to complete the transaction
- Assist the buyer in analyzing the loan estimates
- Qualify the buyer for financial ability to purchase
- Help the buyer account for the complete costs of homeownership
- Prepare lender for listing agent calls
- Assist in comparing different financing options
- Help the buyer select for viewing only those homes that fit their needs
- Proceed in showing homes that fit the buyer’s must-haves
- Caution the buyer on posting information to social media
- Review the sample sales contract so the buyer is prepared when it comes time to make an offer
Showing Properties
- Schedule showings and provide access to all listed properties as soon as they become available in their local MLS broker marketplaces
- Educate the buyer on the immediacy of new listings appearing in their local MLS broker marketplaces and the lag time for them to appear on some websites
- Collaborate with the buyer on properties they may have learned about through their sphere contacts
- Research and assist on all unlisted properties the buyer wishes to see
- Preview properties prior to showing if needed
- Network with other agents to source properties not yet in their local MLS broker marketplaces
- Contact homeowners in focus areas to see if they are considering selling
- Set up an automated email alert system through their local MLS broker marketplaces that immediately notifies the buyer of properties that fit discussed requirements
- Arrange a tour of areas, schools, and key points of interest
- Provide resources containing neighborhood information on municipal services,schools, etc.
- Inform the buyer of negative aspects like nearby venues or operations that may result in issues that could impact value
- Collect and share any other vital information on available homes, remembering to follow all fair housing laws at all times
- Check applicable zoning and building restrictions
- Help the buyer decipher public property and tax information
- Collect and share pertinent data on values, taxes, utility costs, etc.
- Compare each property shown to the buyer’s wants and needs list and remind them of what they were looking for
- Help the buyer narrow the search until the buyer identifies top choices
Negotiating Offers
- Assist the buyer in getting the best property at the best price
- Suggest that the buyer learn more about the neighborhood prior to makingan offer
- Prepare a comparative market analysis (CMA) in advance of making an offer
- Prepare the buyer to have the most attractive offer in the current marketplace
- Explain common contract contingencies and include approved protective clauses in the purchase offer
- Ensure that the buyer receives and understands all state and federally-required disclosure forms
- Prioritize contract negotiation goals with the buyer
- Help create a negotiating strategy
- Use strategies such as an escalation clause to maintain a competitive offer
- Prepare the buyer for a multiple offer situation and develop negotiation strategies
- Write an offer that has a reasonable chance of being accepted
- Recommend optional contingencies and explain the pros and cons of using them
- Provide information on purchasing incentives that may be available
- Discuss financing alternatives
- Negotiate the buyer’s offers to arrive at the best price and terms
- Utilize hyperlocal expertise and strong communication skills to assist the buyer in being the successful offer
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