The 2020 and 2021 real estate market has been red hot. This has been fueled by shelter-in-place causing people to become more aware of the inadequacies of their home + the lowest interest rates in history. Consumer demand for a private home with extra space to work and outdoor space is through the roof. A recent housing market update
by Redfin showed that nationally 56% of homes are accepted an offer within two-weeks, and nationally 44% accepted an offer within one-week. There is literally a housing shortage across the country.
The biggest dilemma and number one question we are getting from sellers is "If we sell our home now, where are we going to move to?". It's not even a question of "if" you can sell. It's that... it's going to sell and "then what?"
Here Are 6 Ways to Sell and Buy at the Same Time
1. Rent-back or Lease-back
If you're in a position where you need the equity out of your current home in order to purchase your next property, one option is to request or negotiate a rent-back or lease-back with the buyer. This means that you move forward with selling your home and negotiate (upfront) with the buyer a time period for you to stay in the home after closing. The time period, rate, and terms will be on a written agreement. The benefits: now you don't have to move twice, you have a little breathing room to find your next home, and you have the equity from your sale in your bank account to write a competitive offer.
2. Find Intermediate Housing
Now, I don't know anybody who likes to move, let alone move twice. If you're open to sell and close on your current property, then find a short-term rental, then this another option to consider. This gives you some flexibility, it gives you time, so you don't have to rush to find your next property. You also have the equity from your sale to go home shopping. Plus for the short period of time, you're not paying property taxes.
3. Home Sale Contingency
The home sale contingency is a seller term of the contract that says - If I find another property, then I will sell you my home. This lets the buyer know that you need to identify your next property before selling your current home. This is an option to avoid moving twice and to avoid negotiating a rent-back. The downside is not everyone is going to want to wait for you to find your next property. Also, if you need the equity from your current home for your purchase, then you might not be that strong of a buyer.
4. Bridge Loan
The bridge loan
is a short-term loan using the equity in your home that gives you the ability to buy your next property before selling your current home. The bridge loan is paid off with the sale proceeds then refinanced into a conventional mortgage if desired. The benefit is you can move into your next home, then sell your current home vacant and staged. There is a potential risk of carrying two mortgages if you're home doesn't sell quickly.
Compass offers a Bridge Loan Advance program that will front up to 6-months of bridge loan payments while you sell your current home. Compass will get reimbursed with the sale proceeds. Great program for those who don't have the cash on hand, or don't want to come out of pocket for the bridge loan payments.
5. HELOC - Home Equity Line of Credit
Similar, but different to a bridge loan, a HELOC gives you the ability to borrow money against the equity in your property so that you can use those funds towards the purchase of your next home. It's not a bridge loan, the rate and terms are different than a bridge loan. Check with your lender for more information.
6. New Construction
When shopping for resale properties, you are competing with the demand of the market and the time period to close is often not sufficient enough to go find your next property.
When shopping for new construction homes or new construction condominiums, especially when the homes are still under being built, there is often more flexibility with the purchase terms and closing period. Some will even allow you to have a home sale contingency.
The benefit is, new construction properties are often first come first serve, and you can reserve your home just by putting down the initial deposit. Then you can use the longer closing period or negotiated home sale contingency to sell your home. Then you can use the sale proceeds to close on your new home.
These are just a few options for people to sell and buy at the same time in today's competitive, low-inventory market. All of these options have pros and cons, but there is an option for most situations.
to discuss these options further if your situation might benefit from selling and buying.