Juggling two transactions at once requires special care, especially in a fast-paced market like ours. Thankfully, there are plenty of ways to protect yourself throughout the transition.
First, ask yourself this question: “Can I afford to buy without selling?” If your answer is ‘yes’, then there are a couple of options to consider, starting with the bridge loan. If you currently own a house with a mortgage, a bridge loan allows you to seamlessly purchase a new home with a new mortgage payment; you’ll pay two mortgages until you sell your original home, at which point that older mortgage payment falls off and you’re left with your new monthly mortgage payment.
Alternatively, you could do what’s known as recasting. Just like with a bridge loan, you’ll start off working with an original and secondary mortgage, but the difference is that upon selling you’ll be able to take the equity you’ve accrued in the original home and put it into your new mortgage. If, for example, you’ve built up $50,000 in equity, you can pour that money into your new mortgage, thereby recasting it into a brand-new mortgage with an adjusted monthly payment.
Now it’s time to ask this all-important question: “How do I avoid homelessness during the transition from selling and buying?” In today’s market, you have to make sure all of your ducks are in a row. A temporary storage facility for your stuff and interim lodging expenses for at least two to three weeks should be built into your plan. It may be easier to sell than it would be to buy, and that’s because a lot of people aren’t accepting contingency offers.
If you do have to present a contingency offer, what’s the best way to protect yourself? A contingency offer is based on the sale and close of your original property. If you present a contingency offer with just the closing aspect, it means you’ve already sold your property; at that point, it’s effectively like a financing contingency if you have to get a mortgage to buy a new home. If something were to happen and the deal for your original property fell through, you’d still be protected in your new contract as a buyer because that contract was contingent on the close of your original property.
There are tips and tricks for writing a contract for contingency on a new home, so make sure you review those with your Realtor before you try anything. Of course, you can always call us with any questions you may have; we’re happy to chat with you! Remember to smash that ‘Like’ button, click ‘Subscribe’ on YouTube, and turn on notifications for our latest content. We look forward to hearing from you!