Monday, May 21, 2018

Just when you think you have everything figured out about real estate, you start pondering which comes first, the buying or the selling phase when purchasing another home?

Certainly when first-time homeowners take the plunge, and assuming they are moving from a rental, the lease will have a specific termination date affording the purchasers a clear expectation to asses an advantageous time to search, purchase and close on their new home. Enough time should be allocated to search for homes and become familiar with the market and what is available in a given price category when making the final decision about a purchase. Be aware that typically, closings can take place after 60-90 days once there is an agreed upon transaction.

In contrast, the lucky homeowner, who already has a piece of the rock, has to be prudent to avoid the financial setbacks of owning two homes.

The dilemma is evident when buyers start to search for their next home before selling. The prospective buyer may have big eyes, hopes, dreams and tall aspirations; however, reality quickly sets in that the equity from the current home needs
to be realized for the subsequent purchase. Of course, there are a pool of buyers who may be qualified to purchase an additional home without falling back on the current equity. In that case, the buyer may focus on the advantages of searching and finding their dream home with minimal timing issues when the right dream home comes along in the area of their choosing.

Let’s explore the scenario when a buyer finds a home and inserts in the contract a purchase with the condition of selling their home. It is typically unwarranted for a seller to procure an agreement with a buyer who stipulates conditionally that
they have to first sell their home. That would leave the seller in a tenuous situation whereby the buyer may default while losing precious time to sell to another qualified buyer. It is rare for an attorney to advise their client to enter into such a contract since it is not much of a contract at all.

The mortgage broker is pivotal in ensuring whether it is the right thing to purchase before selling since he will guide based on individual financial criteria. He will explore options and direct buyers to either purchase while rates are low since the buying power is greater or to wait until their current home is under contract first. Included in the discussion will probably be choices of financing. Note that even though the home has a buyer, the timing of closing may not always precede the purchase of the next home. During that transitional period of time between the selling and buying process, an option of a bridge loan is also available from the lending company. However, just a note of caution that the bridge loan may be at a
higher interest rate since it’s based on a larger amount; the offset is that it is only on a short term basis till monies from the sale of the original home are applied after closing.

Don’t do anything before consulting with the loan officer since he will offer options regarding the additional burden that will arise from carrying two homes.

Here is where a professional realtor is needed. There are no guarantees as to how long it will take to sell a home. The most important aspect is to market the home based on the comparables to ensure a good shot at buying and purchasing successfully. Consulting with a professional will help tremendously.

Consulting with a licensed realtor is important to review comparables that sold on the market within the past six months and no longer than a year in order for home pricing to be realistic. It is critical to bring in an objective professional to assess the market. He will provide guidance as to how best to move a home and attract the right buyer in order for the seller to realize their housing dreams.

Ruby Kaplan is a licensed realtor with V & N Realty who is motivated to meet the housing needs of her buyers and sellers.