Being a move-up buyer can be tough in the current market. Although deals are closing rapidly, there is no guarantee that your new dream home will close at the same time as your old dream home. Sulman Quraishi, owner of Engel and Volkers in West Hartford, joins the show to share tips on how to buy and sell properties at the same time.
Tips for buying and selling real estate:
1. Sell first, then buy.
This is perhaps the safest plan, but it calls for multiple moves. In this scenario, you list your home and complete the transaction before purchasing another home.
When you sell your home, you put the bulk of your belongings in storage and live in a temporary rental or, if possible, enter into a rent-back deal with your home’s new owner.
The advantage of this method is that you know exactly how much you can spend on a new home, and you don’t have to worry about temporary financing. Also, without another home waiting in the wings, you’ll be less tempted to drop the price or to take the first offer that is below the asking price.
The disadvantage is that it is a disruptive experience, and you could be displaced for a while if you are home-shopping for a long time.
2. Buy first, then sell.
This strategy minimizes disruption.
You can move into your new place at your leisure and then take time to prepare your home for sale.
The major disadvantage is that, depending on how fast your old home sells, you could be shouldering the burden of two mortgages for some time.
You are also responsible for maintenance and security on the vacant home. This scenario works best if your first home is already paid off.
3. Buy and sell simultaneously.
To execute this plan, you need to prepare for all contingencies and to know that if your timing is off, you will face one of the two scenarios listed above.
The trickiest bit can be timing the financial burden.
An option is bridge financing To do this, you need to either borrow money from family or obtain a short-term loan from a bank or other lending institution to span the time period between when you close on your new home and sell your old one.
In essence, you are getting a short-term home-equity loan, also known as a HELOC, a Home Equity Line of Credit, on your present house and using it as a down payment on your new house.
You can then repay the loan after you sell your first home. It is not easy to qualify for a conventional bridge loan, since you have to demonstrate that you have enough money to pay for both mortgages for an indefinite period of time.
Experts advise applying for the HELOC well before you buy a new house. That way most of the credit on the line is unused until you actually need it. Lenders don’t like a HELOC that works only for a very short time, and it’s a challenge to get a HELOC if your present home is on the market.
Try to schedule the closing date on the sale of your old home after the closing date on the home you buy. In this way, you can stay in your present home until you move into your new home. Otherwise, you can attempt to negotiate a rent-back arrangement.
Engel & Völkers began in 1977 as a specialty boutique real estate agency providing high-end services to an exclusive clientele. Today, the company is a global leader in the sale and lease of premium residential and commercial property and yachts.
To find out more about Engel and Volkers, go to: westhartford.evusa.com.