Tuesday, October 29, 2013

Are you a "Move-Up" Buyer? How to sell your current Sacramento home and buy another one...

With home values on the rise again in the Sacramento area, I have gotten several inquiries in the last 12 months from folks who want to sell their current home and purchase another one. WHAT!? This is a huge change from the demographic of the Sacramento home buyer in 2006 - 2011. That Sacramento home buyer was typically either an investor or a first time home buyer...but what we Realtors refer to as "move-up buyers" had been scarce. Let me tell you -- move up buyers are back, and have been back for a while now.

Many Sacramento area homeowners have some newly discovered equity. Sacramento home values have increased 30%+ in the last year and a half, and many folks who had the luxury of waiting out the market, who didn't have a financial hardship, and have patiently made their mortgage payments during the roller coaster Sacramento real estate market are ready to sell. Many folks are selling that starter home and moving into something bigger and better, out to the suburbs, or perhaps in a better school district, closer to work, etc. Many are now "empty nesters" and selling the home they raised their children in, and would like to downsize, or move back out of the suburbs into the central city. Whatever the case, now has turned into an opportune time for many to sell their homes.

So how do you pull this off exactly?

Well, some people who want to do the sell-and-buy tango are lucky enough not to absolutely have to sell their home in order to buy another. If you are in the position to be able to purchase your "replacement home" before you sell your home -- this is an enviable position to be in. This requires some strong financial positioning...you will need to be able to qualify to obtain your new loan, while maintaining your current house payment and other debts. You will need to have your downpayment funds in hand, and have sufficient income to make all of your payments under the lender's "debt-to-income ratio" guidelines. So this is relatively simple -- get pre-approved for your loan, find an agent to assist you, purchase your home, move, and then list your other home for sale. Or keep it as a rental (though many people don't want to be landlords). You have the luxury of waiting until the right house comes on the market and buying it. If this is you -- congratulations! But you will be in the vast minority of "move-up buyers."

If you are the other 95%, you will need to sell your current Sacramento home in order to qualify and have the downpayment to purchase your new replacement home. I have helped several sellers/buyers with this lately. And you have some options...and decisions to make.

Option A: Make a "contingent offer" on your replacement home, then simultaneously list your current home. Finalize the new purchase and sale concurrently.

Option B: Sell your home, do a "rentback" and then purchase your replacement home.

Option C: Sell your home, find a temporary home, and then purchase your replacement home.

Rather than write a novel here, over the next week or so I will write individual posts to elaborate on Options A, B, and C. Each has many pro's and con's, certain contractual implications, and certain financial ramifications that sellers should be keenly aware of. So stay tuned...and if you have questions, feel free to ask them. You can comment here, call or email me.

November 19, 2013: How to make a "Contingent Offer" on a Sacramento home. AKA, how to concurrently sell and buy a new home...

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