I had a lot of questions and comments this week from my recent blog post: Where Are We?
The top question was:
How do I go about buying a new home when I need or want to sell my existing home first?
This, of course, is one of our toughest situations right now as it is nearly impossible to find a seller that will accept a home sale contingency. There are some successful solutions to this, even in this current market.
THE SCENARIO: Mr. Smith wants to buy a new home, but needs to sell his current home first.
- Higher Risk: Mr. Smith buys the new house, with no contingency, and lists his existing home for sale. Few folks can swing this from a lending perspective, and even for the more "well heeled", the prospect of carrying mortgages for two houses is too frightening. While this makes for the easiest solution it, of course, involves the most risk.
- Some Risk: Mr. Smith lists his current house for sale, but will only accept a contract with a 4–6-month settlement date. The protracted settlement date allows Mr. Smith the time to wait for a good replacement house to come on the market. While Mr. Smith’s offer for the replacement home will still be contingent on the settlement of his current home, it would not be contingent on it being under contract and this is much more attractive to a seller. The obvious risk here is that if Mr. Smith does not find an acceptable home to buy, he will still be obligated to sell his current home. Other risks are that you cannot efficiently lock a mortgage rate for 4-6 months and we may be facing a rising interest rate environment.
- Lower Risk: Do as described in #2 but Mr. Smith will make the sale of his current home contingent on finding and contracting a home of his choice. This will turn off many buyers, but this is the least risky way to manage the process.
There are other solutions but these are the most common approaches. Please reach out to me any time if you want to discuss navigating the buying and selling process in today's market.