The Studio discusses some techniques on how to buy a home when you already own a home.
How to Buy a Home When you Already Own
So you, like many homeowners in the United States, would like to sell your home and move into something different. Whether it’s bigger or smaller that can be a tricky thing to do. So in this short series we want to talk about some techniques that you can do to move from your current home into another one. There are some technical aspects, there are different techniques for every situation. For whether you are buying first, selling first, third options… There’s something out there for everyone. You’re going to need to talk to an agent, talk to a lender, see what makes sense for you. and what’s financially viable. but hopefully we can shed some light on that for you.
Purchase, then List
One option to consider as a buyer is to actually purchase your home before listing your current home. This may be especially easy for those with a little more financial bandwidth. When you’re working with your agent you go out to find that first home, get it under contract, you should be ready at that point to get your current house on the market. You want to time this somewhere around those critical milestones in your new purchase. Inspection, appraisal, or otherwise. To minimize the impact of having dual mortgages you want a time the closing of those two properties as close together as possible. This is a topic you should consider talking about with your lender.
Another option that you have is to make your offer on the new house contingent on selling the house that you live in. Now this is a little easier financially, but much more stressful when it comes to timing. It is doable, we’ve done it, even in this market. But there are a lot of details and very careful contingency timing steps that we have to take. Here’s roughly what that will look like. You get your current home ready for sale and we identify a property that you want to purchase, get that property under contract, making it contingent on selling the home you live in. Then we immediately list that house, hopefully get that under contract right away, and we line up all the contingency dates so that they follow one right after the other. So in the end the closing on the old house happens just before the closing on a new house. Now the hardest part about this is what property you’re going to buy. I tell my clients it really depends how long that house has been on the market, how likely is the seller going to be to take an offer contingent on selling your house. It’s doable, we have done it. A little harder in this market, but with the right agent and the right timing you can do that.
You also have alternative options when it comes to executing this buy and sell when you already own a home. So, you own a home, you have the option of talking with a lender and going after what is called a home equity line of credit. This is where a bank would assess the value of your property, give you a loan in the amount of maybe 80% of whatever your equity is in the property at that point in time, and now you got that equity in your back pocket that you can use to help purchase your next property. You can use that as your down payment, and if it’s a really tight sellers market, you could potentially now make offers that are not contingent on the sale of your home. A little bit of stress there potentially if you’re unsure of the value of your property or if you think the market might be descending at the time. Maybe a little bit riskier.
There’s also another option that is relatively new to the real estate space. There are some companies out there, there is a company specifically called Easy Knock that will buy your house and give you 80% of the value of your home. Then with that 80% value you pay off your mortgage, you pay the bills that come with the sale of that particular property. And now you have the ability to rent your home back for market value until you are able to find and close on your new home. Then once you move into that new home, the company puts your old home on the market, and any increase in profit that happens as the result of the last sale to this final sale, you share in the profit with that company.