This is the second of a three-part series on strategies for homeowners who want to sell their homes and buy new ones. Yesterday I wrote about selling your home and then leasing it back from the buyer while you’re looking for the new place. Today, I am introducing another possible strategy, with more insight from my lovely clients…
Strategy #2: Buy first, then sell
I cannot emphasize enough that the first thing you should do when you’re thinking about making a move is to look at your finances and talk with a good mortgage broker about your options. Many people are surprised to learn that they are able to qualify for a new mortgage while they still own their current home. If this is the case, and if you have the funds available for a downpayment, you will have the luxury of being able to find (and even close on) a new home before selling your current one.
My clients Priyanka and Vineet went this route when they bought their new Arlington home last year. “We would totally recommend buying then selling if the finances allow for it or maybe even planning your finances that way. This gave us a very comfortable and stress-free experience, since we had no deadlines to buy or sell the houses,” Priyanka said.
Going this route had two additional benefits for my clients. First, they were able to remain in their now-former home after closing on the new one, allowing them to take care of some messy renovation projects before moving in. Second, they were able to delay listing home #1 until they’d moved out, avoiding the inevitable inconveniences of living in a home through open houses and showings.
And not that anyone wants to be carrying two mortgages for any length of time, but considering the speed at which homes here sell, that shouldn’t be a big concern. In Priyanka and Vineet’s case, they listed, went under agreement and closed on their former home in less than two months – and this is pretty typical timing around here.
It’s also possible to speed up the entire process, as my clients Jeff and Kristen did. Although their strategy was always to buy first then sell, as soon as they had an accepted offer on a new home, they put home #1 on the market. Because it was a gorgeous condo in uber-hip Union Square, we had a ton of interest and it went under agreement right away. The buyers were very accommodating on the timing of the closing, so my clients were ultimately able to schedule both their closings on the same day. This was a boon for them because, as Jeff explained, “We were therefore able to put more money down, get a lower interest rate, etc., and while this change in approach felt a bit stressful with a lot of “what if” scenarios, everything worked out.”
Obviously (and unfortunately) the buy-first strategy is not possible for everyone. It’s also critical to understand that I only recommend this strategy if you are financeable for your new home WITHOUT having any kind of contingency for the sale of your current home AND if you have sufficient funds for a solid downpayment. (With the market being as competitive as it is here, 20% down is table stakes, and more can give you a big leg up.) And of course, make sure you budget for a few months of double-mortgage payments, just in case.
Thanks Jeff and Kristen / Priyanka and Vineet for allowing me to share your experiences & insight!