We asked three experts for advice on how to make the decision to first sell or buy in today’s market: Kevin Parker, vice president of field mortgage origination at Navy Federal Credit Union in Hyattsville; Scott Lindner, national sales director at TD Bank in Philadelphia; and Craig McCullough, a real estate agent with Catalyst Group of Compass Real Estate in Washington, D.C., all three responded by email and their comments have been corrected.
How common is it to be able to coordinate closings for sales and purchases?
Parker: Coordinating closings this way can be challenging, but we always do it. It helps to use the same settlement agency for the sale of your old home and the purchase of your new home. If you plan to use the proceeds from the sale of your home for a down payment, contact your lender as soon as possible.
Report: 2022 housing market will heat up faster than last year
Lindner: In the regular market, it is very common to coordinate closings for the sale of an existing home and the purchase of a new one. Often the closings can be done on the same day or a few days apart. But this market is normal. If you don’t have contingencies, you may end up selling your current home and struggling to find a new one due to low inventory or high prices. Therefore, it is incredibly important to coordinate the closing date closely with your buyer, seller, lender, and closing attorney, making sure you are prepared with all the paperwork you need to make the process as seamless as possible.
Add: Your proposal will be treated as a corresponding settlement. This has become a very difficult and stressful process to do without using some special programs or clauses in the contract. Sellers can often request a rental rebate to allow them to “sell” their current home but stay on for a while and buy their new home.
What options are there for sellers who need the money to buy their next home? Are there mortgage solutions to help make the transition?
Parker: Homeowners can tap the equity in their home and use the money from a home-equity loan to pay for the down payment and closing costs of another home. Additionally, some lenders offer low or zero loan options that reduce down payment costs. For example, Navy Federal offers what we call a homebuyer’s choice loan that offers 100 percent financing and can be a good choice for first-time homebuyers or those who are waiting for cash from a sale.
Lindner: Unless you have the income to cover two mortgages at once, there is no mortgage solution that can solve this problem. In this seller’s market, your best bet is to find the home you want to buy first and get it in your offer. In this market, getting your offer accepted is the hardest part of the equation. Work closely and strategically with your Realtor to explore and develop your new buying period and the sale of your current home to ensure you have cash for a down payment at the same time. For example, you may include a “one-time closing” clause in your new home’s contract stating that the purchase is contingent upon your ability to sell your old home. In this market, sellers may not be willing to sign on, but if the seller is willing to do so and you have the money for the down payment, your realtor can negotiate these contingencies into the contract. Your new home.
Add: If a seller needs to buy a home before selling, there is an option in a bridge loan. Bridge loans allow buyers to borrow against the equity in their current home to purchase their new home and then pay off the bridge loan after the original home is sold. The stress of this process is that you have to hold two mortgages until the first house is sold. Compass Bridge Loans offer a program that allows sellers to pay off the mortgage until Compass sells their first home and then pay it off with no additional fees.
Another viable option for sellers is to buy the new home using a low-down payment loan, then after the first home is sold, they can pay a large sum of money towards the principal balance of the new loan and ask the lender to pay it off again. Loan. This usually involves a small down payment, and the loan must be handled by a lender that allows this to happen. It is important to work with your mortgage broker if this is the case from the beginning. You can arrange a credit sale for a noteholder that allows this and understands that it can happen. The homebuyer must be able to afford both mortgage payments on an overlapping basis.
When should someone first consider selling their home? What are the disadvantages of this choice?
Parker: In this seller’s market, selling a first home may be easy, but finding a new one has been a challenge for many buyers. Selling before buying adds another layer of pressure to home buyers. For this reason, we buy many houses and rent them out. This allows the seller to live in the home a little longer while they search and settle on a new property.
Lindner: When you’re in a buyer’s market, you’ll want to consider listing your home for sale first, as there are many, and sometimes even, properties for sale on the market. During a buyer’s market, it can take longer to sell your home, so you should start this process early. Once you’ve entered into a contract to sell your home, you should be able to easily find a new home to buy against the existing listing. The disadvantage of selling first in a buyer’s market is that the buyer can easily work around their own terms because the buyer has the ability to find another home.
The shortage of homes for sale continues to disrupt the housing market.
add: If a bridge loan is too expensive or they don’t have enough equity to qualify for this type of loan, they should consider selling first. The downside to this is that you may have a lot of contingencies when you offer on your next home. Two options to make this more practical are to include a rental return in the sale of your home or include an “option home” clause in the sale of your current home. The clause you choose allows the seller a certain amount of time to find a new home and enter into a contract. Otherwise, the seller can cancel the contract and keep their current home.
When should someone consider buying their next home before selling? What are the advantages/disadvantages of this choice?
Parker: There is a lot of competition in this seller’s market, and buyers feel pressure to buy as quickly as possible. In today’s environment, getting a contract approved is a win. The challenge with buying a new home before selling is coordinating settlements and the uncertainty that comes with the limited supply of homes on the market. If sellers already buy a new home, they lose some bargaining power.
Lindner: When you are first in a seller’s market, you want to consider buying your home when there are no listings available and buyers are scrambling to find a home to buy. For example, buyers buying a home in today’s market – a seller’s market – may face a long process. Entering into a contract to buy a new home before you sell gives you some peace of mind that you’ll have a place to live when you put your current home on the market and won’t have to pay for temporary housing and storage, which add to the cost of the entire move. Process. The added protection you have is the ability to sell your own home quickly and coordinate the closing of the sale with your purchase transaction.
As with any situation, there are downsides to buying your next home before selling your current one. For example, if an individual buys a new home before selling their current home, they run the risk of owning two homes at the same time, making them liable for two mortgages. This can be a financial problem, especially if you’re having trouble attracting buyers to your old home. Additionally, you must prove to the lender in the financial document that you can manage two loans at once.
Add: This is probably the best way to take advantage of a bridging loan. The biggest downside is bridging costs and the cost of carrying multiple mortgages during the transition period. The biggest pro to using a bridge loan is that it eliminates the need for a “home sale.” There is some benefit in reducing the time of transit.
No two situations are the same, so buyers and sellers need a good realtor and a good lender to make sure all their options are well laid out before taking action.