Sell Old Home Or Buy New Home First

Sell Old Home or​ Buy New Home First?
Buyers who are moving up or​ downsizing often have a​ dilemma .​
They can’t decide whether to​ put their home on​ the​ market first,​ or​ contract to​ buy their new home first .​
If they put their home on​ the​ market,​ it​ might sell and then they might find it​ impossible to​ find what they want .​
Alternatively,​ if​ they find a​ home they’d love to​ buy,​ they realize they could lose out because their old home won’t sell quickly enough or​ the​ sellers won’t wait .​
What is​ the​ best approach?
We’ve noted so many times that there is​ seldom a​ right answer .​
This is​ another such instance .​
Looking at​ some of​ the​ alternatives and how they could work for you might make it​ easier to​ figure out how to​ approach getting from where you are to​ where you want to​ be.
Home of​ Choice Clause
Let’s say you decide to​ put your home on​ the​ market first because you want to​ be sure of​ the​ amount of​ money you’ll have to​ work with .​
You (or your Realtor if​ you have one) can market it​ with the​ provision that settlement is​ contingent on​ your finding the​ home of​ your choice.
Thirty days is​ typical for a​ home of​ choice clause,​ but I’ve seen periods of​ time at​ lengths as​ long as​ sixty,​ ninety,​ or​ even one hundred twenty days .​
Wording often runs something like,​ Settlement hereunder shall be contingent for up to​ sixty days on​ Seller’s finding and contracting to​ buy the​ home of​ his choice .​
That can take the​ pressure off and give you breathing room.
Home Equity Loan
You could apply for a​ home equity line of​ credit (often referred to​ as​ a​ HELOC) before you put your home on​ the​ market .​
If you have a​ significant amount of​ equity in​ your home,​ this can provide you with down payment and closing costs for your new home.
You can then shop for a​ new home and write a​ contract contingent on​ the​ sale of​ your old home .​
If the​ seller will not accept the​ contingency,​ or​ if​ you are in​ competition with a​ buyer who does not have a​ sale of​ home requirement,​ you could choose to​ remove the​ contingency.
If you had a​ non contingent contract to​ purchase,​ you’d want to​ quickly put your old home on​ the​ market and get it​ sold so you wouldn’t face the​ prospect of​ two mortgages to​ meet .​
Still,​ if​ part of​ what you’d borrowed could cover down payment and closing costs,​ and part could be set aside to​ meet the​ old mortgage payments for a​ few months,​ it​ could work with no financial strain.
Borrowing out home equity at​ the​ beginning of​ the​ process doesn’t lock you into anything .​
It just gives you more options.
A Bridge Loan
Let’s explore another possible scenario .​
Let’s say you decide to​ put your home on​ the​ market and get a​ contract on​ it​ before looking for your new home .​
You (or your Realtor) begin to​ market it .​
Your home is​ getting lots of​ showings and you’re sure you’ll get a​ contract soon.
You decide you’ll do some preliminary shopping for your new home just to​ see what’s out there .​
You find the​ perfect home and fall in​ love with it​ before you get a​ contract .​
The seller will not accept a​ contingent contract .​
is​ there any way you can avoid losing out on​ the​ purchase of​ this home?
It isn’t cheap,​ but if​ you have very good credit and a​ lot of​ equity in​ your home,​ you can probably get a​ bridge loan to​ buy the​ home you fell in​ love with .​
Generally bridge loans have a​ high rate of​ interest and are for a​ period of​ six months .​
They can usually be renewed for a​ second six month period .​
Typically you can borrow up to​ eighty percent of​ the​ equity in​ your current house to​ come up with the​ down payment you need this way.
As always,​ there are many choices .​
We’ve only mentioned some of​ them here .​
You might want to​ start by meeting with a​ lender to​ determine specifically what is​ possible for you .​
Maybe you can use the​ ideas in​ this article as​ a​ starting point for the​ conversation .​
Who knows where it​ will lead? It could be the​ beginning of​ developing the​ perfect strategy for you.

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