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A question I often get, especially during the current competitive, low-inventory market, is “How do I sell my DC Metro-area home and buy another one, when I need my proceeds from the current home to finance the new home?” It’s a great question because it’s confounding, confusing, and an overwhelming process – the mention of it can send shivers down the backs of the most competent and experienced of homeowners.
Many people have considerable equity in their homes, which is great because they will need this “money,” or at least a portion of it, to use as a down payment for a new property. But, given the extremely low inventory of homes for sale, sellers are extraordinarily judicious in terms of selecting an offer, and often have multiple offers from which to choose. In fact, just yesterday, I was speaking with a couple who were asking how this could work for them. They are staying local but crossing state lines – leaving one competitive market and jumping into another even more competitive market.
We, Realtors, always suggest that you begin this seemingly daunting process by speaking with a locally based, reputable mortgage lender. It helps the loan officer, considerably, to have at least a ballpark price, for which your home might sell. So, a good real estate agent can do a market analysis for the loan officer as a preliminary step. The loan officer also needs to know the rough purchase price a buyer is targeting – which will be impacted by desired features, size, and location of the home. The loan officer can then generate a fairly good idea of future mortgage payments, taxes, and the necessary down payment amount. Armed with that information, a prospective buyer can decide if a purchase is in their future.
The next step is to work with your Realtor to get the home market ready. To be truly successful in this endeavor, a house must appeal to the largest possible number of prospective buyers and must create a strong emotional pull for buyers considering your home. The more buyers there are vying for a particular home, who feel they “just HAVE to have it,” the more favorable the contract terms will be for the seller. It is also at this time that a Realtor will do a detailed market analysis and fine-tune the home’s asking price.
A very fortunate seller will end up with multiple offers, but remember that it takes just ONE good offer to make it work. What listing agents hope for their sellers, is a bidding war where a quick settlement and what’s called a “post-settlement occupancy” or “rentback” period can be negotiated, so that the seller can remain in the home for up to 60 days (per underwriting guidelines) while selecting and purchasing a new home. This allows the seller to realize the proceeds out of the sale of their home, and gain the flexibility to look for a new home and move without the stress of two mortgage payments, having to move twice, and/or endure an expensive hotel stay.
It should be noted, that unless you are able to negotiate a free rent-back period, a seller will typically pay the principal, interest, taxes and insurance, plus any homeowner/condo association fees incurred by the buyer during that time, on a per diem basis. Though this may seem daunting, we find that it is almost always less expensive than moving twice.
While there is the option to make an offer on a new home before an existing home is sold, and make the purchase contingent on that sale, in this market we find this is not acceptable to most sellers. A contingent offer will be immediately set aside in favor of others with fewer contingencies.
Though selling first and negotiating a post-settlement occupancy period is often the best way to go about coordinating buying and selling, having a Plan B is prudent – maybe this is moving in with a relative or finding a short-term rental. A good Realtor can help craft a strategy for success.
The DC-area market can be intimidating; however, that doesn’t mean you can’t achieve your goals. With solid advice from experienced professionals, you can get through the many stages of this process – investigating, preparing, selling, selecting, buying, and moving – with minimal anxiety and optimal results.
Ann McClure is a licensed real estate agent in Virginia and Maryland with McEnearney Associates, Inc. in McLean, VA. If you would like more information on selling or buying in today’s complex market, contact Ann at 301-367-5098 or visit her website AnnMcClure.com.
