In a market like ours, where inventory is super low and trying to buy a home can sometimes feel like a competitive death match, one of the most common scenarios I encounter is homeowners who would LOVE to sell their home and buy a bigger/better/different one, but feel trapped by the market. They know they’ll be able to sell their current home, but are paralyzed by the fear of not finding a new one.
While this fear is not unfounded, the reality isn’t quite so dire. It is, in fact, possible to sell your home and NOT end up homeless or couch-surfing or living with your in-laws. Today, I am posting the first of a three-part series on strategies for managing the process, including insight and advice from those who’ve done it…
Strategy # 1: Sell, but stay in your current home while you search for a new one
While the *usual* home sale process involves the seller moving out PRIOR to closing so the new owners can immediately take occupancy, this is not a requirement. Another option—one that many people are unaware of—is to sell your home with a “use-and-occupancy” agreement, allowing you to rent back from the buyers after closing. This puts you in a great position to buy, with your previous mortgage all paid off and the proceeds from the sale available as a downpayment for your future new home.
But will buyers go for that, you may be wondering?
Absolutely.
Back before our inventory crisis, use-and-occupancies were somewhat uncommon and attorneys generally advised their clients against entering into this type of agreement. However, in a sellers’ market like ours, we’ve all resigned ourselves to the fact that the seller is in the driver’s seat, and buyers who want their offers to be considered have to be accommodating. These days, lease-backs happen quite regularly.
To give you a real-world example, when my clients Mimi and Diana listed their Porter Square condo, they actually already had a new home under agreement, but it was still being built, and the timing for completion was uncertain. They were nervous about listing since they had no where to go. We advertised their home with either a delayed closing or a use-and-occupancy request. Of the nine offers we received, seven granted a lease-back period. (Interestingly, the two that did not were the weakest offers in all regards.)
The offer Mimi and Diana accepted provided the best possible scenario because not only was the buyer very flexible on her move-in date, but also, she was paying cash, which meant she could allow my clients to stay in the condo as long as necessary for their new home to be completed. “This bought us a ton of flexibility without putting us out on the street,” Diana said.
As I said, this was an ideal situation. Keep in mind that if your buyers are financing their purchase, the lender will require them to take occupancy within 60 days, so the amount of time you will be able to remain in your home is limited. But it does buy you two months to find a new home, and that can be extremely valuable.
Thanks, Mimi & Diana, for allowing me to share your story!
Next up… Strategy #2: Buy first, then sell