With historically low interest rates and home equity at a high, you may be starting to think about buying your next house. But how does it work to buy and sell a house at the same time? It can be risky – so here are 5 steps to take first.
1. Talk to a Realtor® Deciding to buy your next home is kind of like putting the pieces to a big puzzle together. A good agent will counsel you and walk you through the steps without making you feel pressured to skip any of them. Once you find an agent, listen to them, they know this market better than you do.
2. Get a market analysis on your current home. Have your agent research the current market and give you a realistic idea of how much you can expect to sell your home for in todays market. They should be able to give you an idea of the NET proceeds you can expect to receive after real estate costs and closing costs. It is important to know how much you will receive to put toward your next house, or how much you need to bring to the table to be able to sell if you have no equity.
3. Get Pre-Approved for a Mortgage. Even if you “KNOW” you can get pre-approved, sit down with a lender and get the facts on how much you are pre-approved for, how much down payment you will need, how much closing costs are and what you can expect your monthly payment to be. You should be comfortable with all these numbers before moving forward. You should also find out if you can buy your next home without selling your current home first. You will need to qualify for both mortgages and have a down payment available in order to do this, but in today’s extremely competitive market it will give you an edge to be able to make an offer that is not contingent on closing on your current home.
4. Understand what you can buy. What type of home is within your budget? Have your agent send you listings of available homes that meet your criteria within your budget. Are you seeing what you like? Is your criteria realistic within your budget? The days of low-ball offers are over. There is an inventory shortage right now so you need to be prepared to act quickly and make a solid offer on the home that you like. You will likely need to bid above the current list price if there are other interested buyers.
5. Contingent Offer or Contingent Sale? With low inventory, one challenge for a seller right now is finding their next home to move to. We do have ways to mitigate this concern. We have sold homes in the past where we have made the sale contingent on the Seller finding their next home to purchase. There is a time frame in the purchase agreement giving the seller time to find a home of their choice and to reach a deal to get that next home under contract. If they cannot find a home in the time period, the purchase agreement on the current home can be cancelled, or the time frame extended if buyer and seller agree. We disclose the need for the contingency in the listing, and actively start looking for a home for the seller once we put their home on the market.
This scenario will always put the seller in a better financial position than the old way of finding the new house first and making an offer contingent on selling the current home. But be aware, in this time of extremely low inventory and multiple offers, many sellers will not accept an offer contingent on the sale of your home, even if you have already accepted an offer on your home.
Getting Started: Once you have researched, made decisions and are comfortable in all of these areas, you can take the steps to move forward. Work with your agent to get your home ready for the market or up for rent. Start looking at new homes. Your agent may counsel you to wait until you receive an offer on your home to start touring homes, it depends on your situation and on the market.
Work with an agent that specializes in the Twin Cities NW Metro. Contact the Myra Jensen Team at 763-227-0618 for a free consultation. Licensed in Minnesota.