What To Do When Caught In Between Selling & Buying A Home
Selling a home and buying a new one can be a difficult balancing act. A homebuyer may want to purchase a home that is for sale; however, they might be hesitant because they have yet to sell their existing home. In an ideal world, both transactions would occur simultaneously. However, homebuyers and sellers can get “caught in between” real estate transactions. The professionals at Coldwell Banker Sellers Realty provide several tips about increasing the chances of selling and buying at the same time and what to do if a “caught in between” situation arises:
Buy on contingency: An ideal way to ensure against getting “caught in between” real estate transactions is to have a prior-sale contingency included in the purchase contract on the new home. The contingency provides buyers the opportunity to withdraw from an offer if their current home does not sell by a certain date.
Consider whether to buy or sell first: There is still a possibility of getting “caught in between” even with a prior-sale contingency in the purchase contract. Therefore, homeowners should consider whether it is better to buy or sell first. Given the current “seller’s market” conditions where there is high demand and homes sell relatively quickly, it may be better to start the buying process first. It is important to note that most people need to sell their current home in order to qualify for a loan to buy their next home, which is usually more expensive.
Coordinate a lease from the buyer: Many people find themselves in a situation where the sale of their current home has been finalized but the purchase transaction is still not completed for their new home. One way to bridge the gap is to lease their current home from the new owner until it is time to move into their new property. An attorney should draw up a contract or lease agreement. Coordinating a lease is effective because it alleviates financial concerns and removes the hassle of having to go to a temporary residence.
Look into renting: The buyer may not always be able or willing to lease back the home, so another option to consider is renting another property. Although relocating twice in quick succession is not ideal, renting serves as a quick fix and can be a necessary option before moving into one’s dream home.
Consider bridge loans: Getting a bridge loan may enable homeowners to move ahead with the purchase of a new home, while still waiting to sell their current home. A bridge loan means borrowing from the current home’s equity until the proceeds from its sale are obtained. With some bridge loans, the requirement is to pay just the interest. Other bridge loans require a single payment of interest and principal at the time the loan needs to be paid back. There are times that bridge loans can be extended, but as they can be expensive if protracted, it’s best to use them for overlaps of a few days between closings, or at the most, a few months.
Review home equity options: If it is necessary to borrow for a longer period than a few months, the best option is to use home equity, particularly if a sizeable equity has been built up. Options include a fixed-rate home equity loan and a home equity line of credit.
Contact Coldwell Banker Mortgage at 1-888-811-0416 for more information about bridge and home equity loans.
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