Downsizing? Upsizing? Ready for something different? So you’ve decided it’s time to sell your house. You couldn’t have picked a better time. House prices have recovered from the recession and have in some areas surpassed pre-recession prices. Mortgage interest rates are at historic lows. Unemployment is down and wages are increasing. Many listings are getting multiple offers and above asking price. Buyers are falling out of the trees.
What could be wrong with the above scenario. Unless you’re moving to a rental you’re also going to be a buyer. If you already own a house you could be at a disadvantage with buyers who don’t have a house to sell. However, there are ways to deal with this without making you homeless. If you’re sitting on enough available cash to buy your next house, you don’t have to worry about it.
First step is to contact your neighborhood realtor. This is where I come in. Have an agent like me come over and check out your home and make suggestions to get your house ready to go on the market. Next ask the agent to do a Comparative Market Analysis (CMA) on your house. The CMA reviews the neighborhood for houses on the market, houses under contract and houses that have already sold. Now the price range for your house can be determined.
In the good old days, when it took months to buy a house, you could write a contract contingent on the sale your house and before you closed on the next one. This is referred to as a Right of First Refusal contract. The seller will continue to market their property. If they get a better offer, you’ll usually have 24 hours to perform or the other buyer gets the house. Since we’re in a sellers market, very few sellers will consider this type of contract. There are plenty of eager and qualified buyers in the market who don’t have a house to sell. However, this may work on a listing that’s been on the market awhile.
You could put your house on the market and sell it. Selling your house is not going to be difficult if it’s reasonably priced right. If you have a non-contingent contract on your house, you could make an offer on the next house subject to the settlement of your house. Seller will still expect a lender approval letter which is subject to selling your house. This may work. However, any offers that are contingent on selling your house are not looked on favorably in this market.
Well now what do we do? I can sell my house but I can’t buy another one. There is another option depending on whether you can get approved for another mortgage to purchase your next house. You still have a mortgage on your home. So now you have two mortgages. This may sound financially irresponsible and reckless. It’s not. However, as long as you can still sleep at night and not have a nervous breakdown, you can do this. Understand that not everyone can qualify for two mortgages at the same time. Strategizing your options should be discussed with an experienced mortgage professional at the beginning of the process. I can refer you to some excellent local lenders.
Now your house is ready to go on the market. You should be looking at houses with your agent and going to open houses so you know what the market is like. When you find the next house, you’ll have to pounce on it and make an offer.
The really good listings are selling on the first day. This means you can’t go home and sleep on it since another buyer may grab it. Here’s where being approved for two mortgages comes into play. One of the first questions the seller’s agent is going to ask your agent is, “Does your buyer have a house to sell?” Your agent will say they have a house but are approved for a mortgage that does not require them to sell their house first. Your agent will attach a copy of a letter to your contract from your lender confirming this. Since you listened to your agent and made a great offer, the seller accepts your offer which beat the others.
Now we put your house on the market immediately and sell it. We make the closing date on your house before the closing date on the next house. If we do this, you will only have one mortgage at a time to deal with. Also, don’t forget to put a rent back clause in your buyer’s contract. A rent back clause means you will still occupy the first house for a set period of time after closing. This is usually less than a week. This will give you time after both closings to move into the next house.
Congratulations you have managed to sell/buy in a very competitive market.
Jim Donohue has been a Hills and Heights resident for 35 years and has been selling real estate for 23 years. He’s a Realtor with Long & Foster.