There are many different reasons homeowners choose to buy a home before selling their first home. Sometimes external factors come into play prompting locating to a different state. Sometimes a buyer’s market provides an incentive to land your dream house in the neighboring county within walking distance to your favorite golf course or marina. One of the biggest benefits of buying before selling is knowing you have a place to go when your home sells. And you won’t need to temporarily store your furniture and all of those moving boxes in a temporary storage facility: you’ll only need to move everything once!
Whatever your reason, choosing to buy a new home before selling your first home takes careful planning and intelligent financial decisions. Here are some tips for buying a home in Eastern Shore Maryland before you sell.
Hire a Real Estate Agent: If you are buying and selling in the same area you can use the same agent for both transactions. This will simplify the whole process for you and your family. A qualified real estate agent will be working in your best interest while helping you purchase your new home at the best possible price and sell your first home at the best possible price.
Down Payment for the New Mortgage: You will likely need to find a way to come up with the down payment for the new mortgage. There are several options to consider including HELOCs (home equity line of credit), bridge loans, borrowing from your 401k (you can borrow up to $50,000 or half of your balance, whichever is less, at a reasonable interest rate), or applying for a low-down-payment conventional mortgage (and plan to apply the proceeds of the sale of your home to the mortgage and have it recast which is less costly than refinancing a mortgage).
Extended Closing: Requesting an extended closing beyond the standard 30-45 days can simplify matters in coming up with the down payment for the new mortgage. This gives you time to sell your home and use the well earned equity from your first home. It can help to keep things simple when the market is right. Consulting with your real estate agent will help determine when this is the best strategy for you, depending on the market conditions.
Sale Contingency: You can include a home sale and settlement contingency in your formal offer. The State of Maryland allows this contingency: stating you need to sell your home before you can close on the new home. The sellers are allowed to seek other offers, and they will likely want a 72 hour kick-out addendum. This works out best for home buyers during a buyer’s market when the seller is less likely to get another offer. Timing is everything with a sale contingency, and your real estate agent will help you navigate the nuances of the transaction with precision.
Rent Your Home: Sometimes it makes sense to wait out a buyer’s market and rent your first home until the market shifts in your favor. Your agent may be able to help you find a long-term tenant to cover the costs of the first mortgage during this time.
I look forward to helping you find your dream home on the Eastern Shore of Maryland. We will work together to make the process of buying your home before selling your first home a pleasant experience. I am a resident and have a lifetime of Eastern Shore relationships, resources, and real estate experience to handle all of your transactions with great dexterity. Contact Chuck Mangold today!