In this fast paced and competitive DC housing market, buying is a challenge in itself without adding in the extra variable of selling a home at the same time. Sure, in an ideal world, you would be able to keep both your old home and buy a new one, but the DC real estate market strikes again and for many this is not financially feasible (or maybe you don’t want to experience the joys of being a landlord).
When selling and buying, timing is everything and advance planning is your best bet for a successful move, without having to move more than once. There is no one size fits all solution to this challenge but there are a few options to consider:
Option 1: Sell first, then buy. This usually includes an extended settlement date or rent back on the sale, to allow time to purchase.
Pros: you will have any proceeds from your sale to apply to your purchase. You won’t be stuck with 2 housing payments at the same time if it takes longer than expected to sell your home.
Cons: You will have a limited amount of time to find the home that you want to buy and ratify a contract (usually 2-4 weeks). There is a risk of not finding a home, or not ratifying a contract, in which case you may find yourself making sacrifices that you didn’t intend to make, or opting for a plan B of a temporary housing arrangement.
Who should consider this option: If you think that it will be easier to buy than sell. If the sale of your home may take an unpredictable amount of time, and you feel confident that you will be able to find a home that you want to purchase in a short amount of time.
Pro tips: Start looking at homes before you list your house for sale. Do your home shopping homework in advance and define what you are looking for and where you are most likely to find it.
Option 2: Buy first, then sell. Check with your lender to see if you are able to qualify for the financing that you need to purchase the home you want to buy, without selling your home first. There are specialized loan products that allow you to apply the proceeds of your sale and pay off a portion of your mortgage at a later date without too much of a financial penalty.
Pros: Flexible timing for your purchase. You can wait until you find the perfect house (and ratify that contract) before listing your home for sale
Cons: Having 2 mortgages can be expensive, particularly at a time when finances might be tight. You may not end up with exactly the same mortgage terms that you would have if you had sold your home first.
Who should consider this option: If you are financially able. If you think that it may take you a while (or a few offers) to ratify a contract on the home that you want to purchase. If you are considering purchasing during a time of year when new listings/inventory is very low.
Pro tips: Before you start your home search, have everything ready to list your home for sale including any repairs, improvements and the marketing. Being able to put your house on the market immediately after you ratify a contract to purchase will save you time and money.
Option 3: Purchase contingent on the sale of your home. Once a common scenario, it is now very rare due to the fact that it is challenging to find a seller who is willing to consider an offer contingent on the sale of a home.
Pros: You are in control of the timing, if you don’t sell your home in the timeframe that you specify, you can terminate the contract on the home that you are planning to buy.
Cons: For a seller, a sale of home contingency represents a substantial risk. They have no control over whether or not the buyer is able to sell their home in the designated timeframe. This is more commonly considered in off market sale scenarios where there is more flexibility with timing.
Who should consider this option: It’s probably not worth considering this as a viable option unless you find yourself in an atypical situation where the seller isn’t under any time constraints. Or if you are purchasing in a buyers market.
Pro tips: Including a sale of home contingency in an offer in DC will often result in the offer being rejected, and doesn’t set you up well for negotiating a contract. Consider option 1 or 2 and leave this option for special scenarios.
There are other options outside of these 3 scenarios, if you are interested in discussing your specific situation and objectives, feel free to send me a message at [email protected]c.com.