Good Times, Bad Time
powered by Content that WorksPosted on: June 2017
Higher home sale prices have many homeowners asking the age-old question: How much could my home fetch if I sold it today? While it’s exciting to speculate on answers to that query given the current seller’s market, it may not be the most important question to ponder.
Instead, ask yourself: If you were to unload your property right now, where would you live next, what could you afford and how hard would it be to find your next home given the current housing shortage?
Indeed, the results of a new Redfin poll indicate the biggest hurdle for home sellers in 2017 is a dearth of domiciles to choose from when they themselves move; nearly 66 percent of real estate agents polled ranked low inventory/worries about finding another home to purchase as the greatest challenge right now for home sellers.
That’s a legit concern, say the pros, because any higher-than-expected profits you make on your timely sale could get nullified by the exorbitant price you may have to pay on your next residence – especially if you get in a bidding war with other buyers. Plus, you may not be able to time your listing and sale to coincide with a closing and move-in window on your next home.
For better peace of mind on these issues, prepare to do your homework well before that “for sale” sign goes up.
“Sellers should definitely have an idea how much they will make from the sale of their home and then how much they can afford on their next home,” says Brittney Atwood, real estate contract expert from Huntington Beach, Calif. “That requires speaking to an agent and a mortgage lender to get those details squared away before listing.”
Additionally, sellers-turned-buyers need to begin shopping for their next home early “to get a good idea of what they want and how quickly and competitively the homes they desire are selling for, so they can be prepared for when they are ready to make an offer,” says Rachel Musiker, spokesperson with Seattle-headquartered Redfin.
John Powell, broker with Help-U-Sell Real Estate in Tucson, Ariz., echoes that sentiment.
“Check out the available inventory before you list to get a feel for what’s available and at what price,” says Powell, who recommends getting pre-qualified for your next mortgage early in the process. “If inventory is tight, consider the possibility of purchasing a new construction home, which can make the whole timing and transition thing easier.”
Buying a move-in ready new home or soon-to-be-built abode can take some uncertainty out of the equation, as you don’t have to worry about when previous occupants will move out. But new construction homes can go fast, too, and you may have a budget that limits you to older existing homes only.
One of the least-recommended strategies is to place a “subject to seller finding suitable housing” contingency or clause in your next home’s purchase contract.
“In a hot seller’s market, this is more difficult to have success with because the seller of the next home you want to buy is more likely to accept a non-contingent offer over a contingent one,” Atwood says.
A better option, she notes, is to pursue a “seller rent back” agreement, wherein you stipulate in an additional contract that you have the option of renting back your sold home from the new buyer after close of escrow.
“This gives you time to find and close on your new home, and it’s usually agreeable to the buyer because they can negotiate the rent and coordinate the timing of their move,” Atwood says.
Or, you can try to find alternative living arrangements, “either short-term rentals, extended stay hotels, or living with friends or family while keeping your belongings in a storage facility,” suggests C.J. Johnson, broker/CEO of 3CR Global Properties in Baton Rouge, La.
An advantage to selling first and moving into temporary housing for a while is that your cash is freed up, “enabling you to offer a larger, more competitive down payment on the next home you’ll eventually find, which can make your offer more desirable,” Musiker says.
No matter which option you pursue, “take time to research, understand market dynamics and arm yourself with a team you can trust – including an agent and lender,” Musiker adds.