Wednesday, November 23, 2022

Want to sell your Sacramento home and buy another? Here are your basic options for the sell-buy tango...

If you follow me on Twitter you may already know that in the last few weeks I have heard from several people looking to purchase a home...the quandary is -- they own another home they need to sell in order to purchase another home

The sell-buy dance is a delicate one and there are a few different ways to approach it that I will outline below... A "contingent" offer is essentially one that hinges on the sale of your current home in order to complete the purchase of your replacement home. You are not obligated to complete the purchase of the replacement house until your current home sells. Sounds amazingly great right? Well, there are pros and cons. 

First let me explain how this really works and start with the basically have THREE options foe different scenarios to sell your home and buy another one with lots of nuance and variations in between them. 

OPTION A: List your home, sell your home, move out and rent while you look for your next home. 

OPTION B: Get your home 100% ready to go on the market. Have the home professionally photographed. Start house hunting. Get into contract on your replacement home and list yours immediately. Concurrently close both transactions. 

OPTION C (a hybrid of the other two options): Leap of faith - list your home, get your home into contract with a buyer. Negotiate the opportunity to rent your home back from your buyer for a time (or be prepared to find a rental). Start house hunting. Find and get into contract on your replacement home, and concurrently close both transactions. Or if you do not find a replacement home during the rentback period -- move out and rent

If you do not tolerate stress well, and do not have a high tolerance for dealing with lots of unknown timelines and variables then OPTION A is probably the least frenzied of the three options. OPTIONS B and C will involve a bit of luck, stress, and frenzy. I will say that I have helped clients successfully in all three scenarios...there is no right or wrong methodology here, though you will have to decide what option is best for your situation. 

By all means, before you decide to do any of these scenarios -- start working with your Realtor and loan officer and lay out a game plan. Have your Realtor do an estimate of value for your current home (and please do not assume that any online automated valuation of your home is accurate -- it likely is not) and a "net sheet." A net sheet will itemize all of the costs associated with selling your home, like title insurance, escrow fees, property and transfer taxes, natural hazard disclosure, commissions, inspection reports, repairs, etc. It will also give you an estimate of how much money you will have left over at the end of the transaction to put toward the next house. I'd encourage you to plan for the worst case scenario and be somewhat conservative with the estimates -- for example, I typically base my estimated net sheets on the low end of the price range I come up with, and the assumption that you the seller will absorb all of the transaction costs, and I even add a little miscellaneous padding. The last thing we would want is to over-estimate how much money you will have after the sale...and then find you don't have enough for your next home purchase. Once you have figured out approximately how much money you will walk away from the sale of your home with, visit your loan officer armed with this information. You may have other funds (savings, a monetary gift, etc) in addition to the proceeds of your home sale to put toward the next house. Your loan officer will then take this hypothetical amount, run your credit, look at your income and employment, and help you come up with a budget and loan pre-approval for the purchase of the next home. 

Next you have a choice to make. Ask yourself: Am I ok with moving twice? 

Moving itself can be a headache and bit stressful, however you may find moving twice to be the least stressful of your options. If the answer is "YES" that you are ok with moving twice -- then list your home. You will engage in OPTION A or C. 

If you do not want to move twice, then you likely fall into OPTION B. And for the love of all that is holy -- with this option GET YOUR HOME READY immediately like you are going to list it immediately. When you are shopping for another home without your current home in contract or already on the market, you must be prepared at the drop of a hat to be able to list your home. There are a couple clients I am working with where I have already had their home professionally photographed -- so that when the home of their dreams hits the market we are ready to pounce! The best way to convince a seller to accept your contingent offer if your home is not already on the market and in contract to be sold is -- have a bulletproof gameplan to have it on the market immediately and in contract immediately. 

These sell-buy domino transactions require good timing, a little luck, a skilled real estate agent and loan officer, and high tolerance of dealing with lots of unknown timelines and variables. Feel free to reach out to me to talk through the nuance of each scenario to determine which one may be the best fit for your needs.

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