Posts from June 7th, 2021

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Real Estate Tips | 25 Posts
Real Estate Tips John Yoder Team Key Realty, LLC
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June
7

June 7th, 2021 by

Buy-Then-Sell Strategies That Can Make Your Life Easier in This Market

Has anyone taken the time to tell you that you may not need to sell before you buy your next home? Our team has had this discussion with our friends and clients, and we've found that many homeowners are delaying their plans to sell because they are afraid of being homeless. This makes complete sense— I wouldn't want to face homelessness either. This market is ultra-competitive, and while drastic home appreciation creates a major opportunity for homeowners, current market conditions present challenges as well.

But what if I told you that you could purchase your next home before you sell your current one— and do it without a home sale contingency? Wouldn't that be a game changer?
The roadblock that many homeowners face when purchasing their next home is their downpayment. Not everyone has 20% saved in cash. Most of the time, people leverage their equity for their downpayment, and this is the right idea! In fact, a lot of people have been doing this through simultaneous closings over the years. In past and less competitive market seasons, the process usually looks something like this: 1. List current home and get it in contract, 2. Find next home and get it in contract with a home sale contingency, 3. Work out timeframes for a simultaneous closing, where you close on both homes within a very short timeframe. But can you see how this process is problematic in this market?
One tweak in this order of operations can make your life so much easier. I recommend looking into loan products that will leverage your equity first, before you sell your current home. Let's take a closer look at these products:
A home equity line of credit can be particularly useful to homeowners that have paid their loan down significantly and have a lot of equity in the home. A line of credit will be a loan that borrows against that equity so that you can use it as a downpayment on your purchase— possibly even for repairs, if those are necessary. Once you sell your current home, you can pay off both the mortgage and the line of credit with the proceeds.
A bridge loan will be loan that covers both your current home and your next home for a short period of time. Often, these loans are principal and interest only, which can make this option surprisingly affordable in the meantime. This product allows you to secure your next home, then sell your current one. Once you sell, the loan will get refinanced to cover only your new home.
A float down loan is similar to a bridge loan, but it does not involve refinancing. You'll apply for a fully amortized loan that covers both your current property and your next one, and usually these payments are higher because they include both properties, taxes and insurance. Once you sell your current property, the proceeds are applied to the loan and the payment "floats down" without being refinanced.
These loan products benefit you in three major ways:
  1. All of these strategies increase your negotiating leverage because they eliminate the need for a home sale contingency. You'll likely be competing with buyers who do not need to sell a property, and now you can be one of them!
  2. The timeframes will work better for you. Wouldn't it be wonderful to move into your next home before listing so that you don't have to be inconvenienced with the flood of showings?
  3. It alleviates the pressure by giving you time to find a home that fits your criteria. Believe me, this is a major benefit. When I listed my first home four years ago, it went into contract within 48 hours. Market conditions weren't quite as hot as they are now, but things were already trending up and getting competitive. My husband and I had about a week to find our next house in order to work within the contract deadlines, and the pressure was overwhelming. We ended up purchasing a home we didn't love. It needed work, and we had to live in a home we were renovating. We made it work, but it wasn't ideal! These loan products, however, have been borne out of this market as an alternative so that you don't have to go through what I went through.

Slam dunk, right? Of course, I am not a lender. You will definitely want to discuss these products with a lender directly to make sure they are a good fit for your situation.

Our team would love to hear from you! If you would like to learn more about buy-then-sell strategies like these, please contact us right here, on our website. One of our agents would be happy to discuss your real estate goals.

Until next time!
Cassie Johnson
Key Realty - John Yoder Team

Categories: Real Estate Tips
Tags: Real Estate Tips, John Yoder Team, Key Realty, LLC
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