No greater coordination challenge exists than the feat of selling your home while buying a new one at the same time. So many factors of time and space swirl on both sides that it’s totally rational to want to separate the task into two individual projects. Ideally you’d be closing on both transactions simultaneously — exchanging your old keys for new ones in a matter of hours or minutes, then riding into the sunset on your unicorn. Non-ideally, we live in the real world.
But don’t worry, thousands and thousands of homeowners have survived the undertaking, and you will too. Here’s what you need to know to make the process as smooth as possible.
Get real with your finances
Most people need the equity and liquid capital from the sale of your old home in order to purchase your new home. If you are fortunate enough not to need the profits, then you have more options — staying in a hotel, doing a short term rental, going on safari to look at giraffes while your staff finds you the perfect place. You just need to creatively bridge the gap between sale and purchase.
But if you’re like the majority, you’ll need to have a discerning look at your financial situation. Talk with your lender about how much you can realistically get, not only to buy, but to cover most, if not all, of the myriad fees associated with both sides of the transaction.
These fees might include:
- Transfer Taxes (can be on both the sell and buy side depending on the purchase)
- Broker’s Commissions
- Financing Fees
- Attorney Fees
- Inspection and Appraisal Fees
Once you have some cold hard numbers, use a spreadsheet to keep them organized and at your disposal when you need to pull them up quickly.
Understand the current climate
Before you can get into the nitty gritty of the deals, you need to know what the real estate climate is. Is it a buyer’s market or a seller’s market?
If it’s a buyer’s market, where supply exceeds demand., focus first on how you’re going to get out of your place. Calculate the minimum you need from the sale of your current home, in order to make a move on the new place when you want. If you need to buy some time, you can explore closing and then leasing back from the new buyers. If the buyers are agreeable, you shouldn’t plan on leasing back from them for more than a month (unless you get lucky and the buyers will let you stay longer post closing). Alternatively, pick an earlier closing date and then schedule the moving date out a bit, so it aligns with the closing on your new home.
If it’s a seller’s market, when there are more buyers than homes to get, focus first on what you’re going to buy. If possible, plan to have your down payment in hand without the sale of your current house. That way you can nab a spot, and then sell yours quickly in the hot market.
Personify the Boy Scouts’ motto
Always be prepared. Time is fickle and people can be mercurial. These are the guarantees of any real estate transaction. So the best thing you can do is be prepared for all the possible mishaps that could occur. The three most common worst-case scenarios are:
Your sale falls apart. The buyers of your home decide to sail the Caribbean instead (or they don’t get a mortgage and just can’t close), but you’re locked into a hard contract on the purchase of your new home.
Your buy falls apart. The sellers of your new home decide they’re actually not going to sell (or some other strange circumstance happens and you no longer purchase the home you have a contract to buy), but you’ve sold your old home and don’t have anywhere to go.
Construction is delayed. The build, remodel, or repairs of your new home are taking longer than you planned on.
Luckily, there are three things you can do to prevent these situations from happening, or at least mitigate your losses in the event that any of them do occur.
- Do everything you can to make sure your contracts are ironclad. A good real estate attorney will help with this. In some cases you can get out of your contract with a developer if they take too long to finish the home.
- Plan for the worst-case scenario. And be pleasantly surprised when it doesn’t occur.
- Always have a backup plan, especially if you’re at the mercy of co-ops, building associations, banks, builders or new construction.
When it’s all over, you’ll breathe a sigh of relief in your new home, but until then, be as nice to yourself as possible by staying organized, knowing your numbers, and sticking to a plan.
Submit your email below and gain access to KJ’s handy dandy sheet to help you plan for all the possible scenarios.
Share this article with your community: