Hey everybody it’s Austin Solomon and welcome to this week’s episode of The Real, Wausau Real Estate show. Today we’re talking about three approaches to moving from your current home to your next house. So whether you’re downsizing or looking for your forever house, or relocating to another area, if you own a home now and are looking to buy another, there’s really three approaches you have to consider.
We’re going to talk about the pros & cons of each and you can decide which strategy is for you! A lot of people think if they want to buy a house but they have one now, the place to start is by looking at houses, but really I would dial in on this. “Hey which one of these approaches am I going to use?” that’s kind of the first step.
Here’s the three strategies. One is to move into another place, whether that is a house or a rental, so you move first and then you put your house up for sale to sell.
The second strategy is to find another home, make an offer on it, and make that offer subject to your home selling.
Then your third approach would be to first place your house for sale, get an accepted offer on it and then focus on finding a home.
So there are three ways you can make this relocation happen. We’re going to talk about the pros and cons to each.
So with the first one if you find your next home first then you move and vacate your original home and then put that one up for sale. There’s some pros and cons to that. One of the pros of that is it’s not that stressful of a move, or I should say it’s less stressful than some of the alternatives. You can move in your own timeframe, you don’t have as many timelines and timeframes that have to happen because you have two places at the same time, you can move in your own timing. Which is nice!
The second pro is you can find the right place before you move and you’re not crunched to find a place. The third pro is if you’re looking to purchase another house, you can make a strong offer on that home.
Obviously, you’re living in your home now and you’re looking to buy another to move into and if you don’t have to sell your home in order to buy that one, you’re going to put yourself in a much better position if you’re making that offer on the next place to secure it.
Forth pro would be that you can be completely, so again, if you buy that next house and move into it, you can completely move out of your existing house or maybe leave it a bit staged. But either way you can get it ready once and then it can be shown without you having to prepare it everytime. So it’s very easy to show and easy to prepare and maximize the sale price because obviously you’re spending time on preparing the house and can spend a little bit of extra time to make sure it all goes well.
So the cons of this approach would be, the biggest one is you could end up with two houses. You find that dream place and you’re stuck with two houses and you put your house up for sale and it doesn’t move, well then you’re stuck with two homes and there are some carrying costs associated with that. And that’s really the biggest con on that approach.
The second approach would be, and we see this one a lot, so you’re in your house now, you’re looking for another place, you go out and look for another house and when you find the right one you make an offer and you tell the seller, “Hey, I’ll buy your house as long as our home sells.”
So this is called a contingent offer, it’s contingent on your home selling. The pros to this is you find the right home before you place yours for sale, so you’re not going to end up homeless and you don’t have to worry about two mortgages because you’re only going to be buying that house if your home sells.
The cons to this approach and the biggest one is in a competitive market, a lot of times you might be looking for your forever house and you go to the seller and say I love your house, I’ll take it. Well there may be some other parties interested that don’t have to sell a house in order to buy that one. And when you say, “Hey seller, I’ll pay full price but I need to sell my house”, again, if there are other parties interested that don’t have a home sale, it’s going to be very difficult to secure that home.
This is especially relevant if you’re going from a higher price point and you’re downsizing. So, for example, if you’re making an offer on a $150,000 house subject to your $350,000 house selling, that really doesn’t work very often because that $150,000 is more competitive than the $350K.
Or if you’re maybe going from a similar value, maybe you’re going from a $150,000 to a $190,000, again when you make an offer on a house subject to your house selling, that contingency is concerning to the seller and often times if there are other parties interested you won’t end up with the house.
In order to compensate for that, the only thing you could really do if there are other people interested is, you would have to increase your offer. So that’s one of the things you could do to offset that. So you might end up paying a little bit more than you should or what you could have if you used one of the other approaches and it might take a couple tries. Again maybe some of the houses you’ve seen may have a couple others interested and you have to give it a couple tries if you’re not getting the house.
The second con to this method is you find the house and put your home up for sale and kind of scramble to list your home to try to get it sold right away before someone else comes in. Because of that too, you may be tempted to take less on your home sale because you have something riding on your home selling and you getting that next house. So you might be tempted to take less than you could of using one of the other methods.
And then the other con here is, it is a little bit stressful. You are coordinating two moves, you are traditionally closing on both homes on the same date, so there is a little bit of stress involved in this method as well.
The third approach would be to place your home for sale first, focus on getting an accepted offer on your house and then focus on finding another home.
The pros of this method are if you put your home for sale first the main goal from the gate is to maximize the sale of your house, so that’s nice. You can first maximize the sale of your home, focus on that. In this method too, you don’t have to focus on two mortgages, which is great. And the other pro is when you’re looking for a house, you can make a much stronger offer and get a better price. So if you get an accepted offer on your home and all the conditions are met and things are looking good, and now you’re starting to search for homes, when you go and make an offer on the house, you can tell that seller, “Hey, I do have a house that needs to close but we already have an accepted offer on it and it’s looking really solid and the conditions are removed”. That’s going to be a much better position to purchase when all of those things are already lined up on your existing house. Which can translate to you getting a better price and terms on the house you buy.
And the other pro would be you have a higher chance of securing the house. Again, if your house is, the house that you’re in now, the one you have an accepted offer on, because your house is already spoken for, you now have a better chance of securing that right place.
The biggest con about this method is well, hey if I put my house up for sale and I don’t have a place to go, what if I settle for something that’s not the right fit and that’s the biggest con there. How you get around that con is you have enough time to find the right place but that can create some stress. There is a lot of stress in that.
So these are the three methods. The biggest thing is you have to decide what is right for you. The first thing you’d have to do is talk to a lender to see which options you could allow.
Obviously, if you can’t financially have two homes at once well then the first method is probably out, if you’re looking to buy your next house and keep your existing one. If you can’t financially do it, it’s probably not the right fit.
If you can, then you have to figure out, what’s my risk tolerance in owning two homes and being stuck with some potential extra holding costs and that’s where talking with a real estate agent can really help and give you the confidence you need to make a good decision.
A lot of times if you go and buy and have two homes and the real estate agent is really confident your first house is going to sell right away because it’s a really good market, then maybe you can do it. Again, make a strong offer and focus on finding that right house and own two.
So yeah! There’s obviously some different options. The biggest thing is consult with your financial officer or your lender to see which options are available and then talk with a real estate agent to see what’s right for you, but it’s best to have a good solid game plan and commit to one of these points before you even start the process.
That way, you know what the expectations are and the agent knows that too. If there’s any questions on this or relocation. I love relocation. Or if there are any questions on any of these approaches, feel free to reach out.
Thanks again for tuning into this week’s episode of The Real. I really appreciate the people that are listening and hopefully this is of value to you guys and it can help you make good decisions in the real estate market. So thanks again!
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Austin Solomon | The Solomon Group – Coldwell Banker Action – (715) 212-4693