You own a home. But it’s getting small. Or you want a better school district. Or you are tired of your commute. Or you want a yard. (Or you don’t want a yard!)
There are so many reasons to want to move! But you own your place, so it’s complicated, right?
It doesn’t have to be. As long as you’re prepared with the right information and know the right steps, you can get through it successfully. People do it all the time!
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The situation can usually be broken down into two different scenarios:
1. You’re ready to buy your next place (and have the means to do so) before selling your current place.
2. You must sell your current place in order to buy the next place.
The first scenario is a bit easier. If you have enough funds to make the next purchase, then you find the next home, enter into a purchase contract without a home-sale contingency, and close on the deal. Once you own your next place, you move, list your former home while vacant, and take steps to secure a purchaser.
Your Realtor should be able to advise you on timing and your home’s value. You’ll want a careful market analysis and a good listener who hears your needs to help you get the best price within a comfortable time frame.
Option 1 is great — but unfortunately it’s not always possible. Many people have the equity for their next purchase tied up in their current home.
There is one option that may still allow you to buy before selling — it’s called a bridge loan, and it’s when a lender gives you a short-term loan on your equity to make a downpayment on next house. TIP: Many lenders don’t do these type of loans, but many credit unions still do! Ask me for a good one if you want to explore this option.
If a bridge loan isn’t right for you, then you’ll have to sell your current place in order to buy the next. This adds an element of uncertainty, which is stressful when you’re talking housing. But with good planning and knowledge of market conditions, it’s usually not so hard.
If you have to sell in order to buy your next place, you will need a few things:
- Market value of your current home and how much you can expect to walk with
- How to price your home in order to get an offer in the time frame you want
- Finances lined up, so that when you get a contract, you’re ready to move
- Knowledge of active inventory for your potential next house
What if the deal falls through and messes up my next purchase?
You can’t control all the moving parts, but a good agent helps the ship stay on course. You’ll need a smart price in order to find a buyer within the right time frame, and you’ll want to be reassured that the buyer has been fully and thoroughly vetted. Your real estate agent should stay on top of contingencies and keep you informed throughout the process.
Where will I live if I sell my place and don’t find the next one in time?
With contract in hand you’ll focus on finding your next home. It’s great if everything lines up perfectly, but sometimes market conditions don’t allow for it. That’s why you’ll need thorough knowledge of current inventory so you’re ready to jump when you get your contract.
A few clauses in the contract help and protect you while working through the process of selling a home and buying your next home in Denver:
- Rent-back clause – This would be included in the contract for the house you’re moving out of, and allows you to rent your home from the new owner after you’ve sold it, if you need a little more time to close on your next purchase (typically up to 2 months).
- Home of Choice contingency – this provision allows you to delay closing on your current home until you find your next home. Time limits are negotiable and at some point the buyer will have the right to call it in, but this should give you enough time to find your next place.
- Home Sale contingency — allows you to write an offer with closing contingent on the sale of your current home. Depending on market conditions, this may or may not work.