Buy First Or Sell First?

Selling and buying at the same time is not as easy as you might think. The question is, which do you do first? Coordinating a purchase with a sale can be tricky. It takes a bit of expertise AND a little luck!

Do you remember closing on your first home? Most people remember it as a very hectic day! Now imagine closing two homes on the same day. The details and responsibilities can be overwhelming!

As a seller, you are responsible for vacating your home and having it in "broom-swept" condition at the time of the walk-through. Generally, the walk-through (for your buyer) will take place about an hour before closing. So, if you're like most people, you'll have packed your life up on to a couple of trucks with nowhere to go until after you close on your new home many hours later!  That can definitely make for a difficult day.

Let’s first take a look at the questions, problems and difficulties associated with the two scenarios:

SELL FIRST . . . BUY LATER:

• What happens if I can’t find a home to buy?
• How much time do I have to find a home?
• How long will it take for me to find a home?
• Once I’ve found a buyer what do I use for a closing date on my current home?
• What if my buyer gets tired of waiting and “walks”?

BUY FIRST . . . SELL LATER:

• What happens if my current home doesn’t sell?
• How long will it take for my home to sell?
• If I close on my new home will I be able to carry the costs of two homes?
• If so, how long will I be able to do this?

As you can see, neither scenario is perfect.  Most people respond “yes” when asked the question, “Do you need to sell in order to buy?”  But that’s because (1) they would prefer to use the proceeds from their current home to buy a new one and/or (2) they’re not comfortable buying without selling first.  If you’re just not comfortable buying without selling first then your sell/buy process will run something like this:

Sell First . . . Buy Later:

• Get your home under contract and have your buyer agree (in writing) to either an extended closing date or, even better, to a close date “To-Be-Determined”
• Find a new home and get it under contact as soon as possible
• Conduct a home inspection. If all is well . . . sign a Purchase and Sales agreement
• Once you’ve received a mortgage commitment for your purchase, go back to your buyer and have them agree (in writing) for the closing of your current home to take place on the same day or very close to the same day as your purchase.

Buy First . . . Sell Later:

• If you are going to buy first . . . sell later, you are probably planning to pay “cash” for your new home or have a large sum of money for a down payment.  If not, you will need to become familiar with the equity loan and/or the bridge loan.
• The purpose of these programs is to allow you to purchase without selling first by accessing the equity in your current home.  Keep in mind that you will need substantial equity in order to take advantage of either of these two programs.
• First off, you should think of the equity loan or the bridge loan as a type of insurance policy. It's only there in case you need it:

  • The goal . . . to understand the program, the process and the associated costs.
  • The objective . . . to not have to use the program at all or to just use the program for a very short period of time.
• The equity loan can only be used PRIOR to putting your home on the market.  The bank will pull money from your equity and pass it along to you for your down payment and other expenses associated with your purchase.  For more specific details on this program and process please contact your own mortgage representative or ask us for a recommendation!
• For the bridge loan the bank will also pull money from your current equity for the down payment and expenses associated with your purchase.  The bridge loan, however, will allow you to “carry” two homes at the same time.  The cost of this program and the length of time you’re able to carry the two homes is related to the amount of your equity.  For more specific details on this program and process please contact your own mortgage representative or ask us for a recommendation!

Using The Bridge Loan For A Short Period Of Time:

• If you’ve managed to find a new home and have also found a buyer willing to close the same day as your purchase . . . CONGRATULATIONS!  You and your agent both deserve a lot of credit!  But even if that’s the case you should consider the advantages of using the bridge loan for a short period of time.
  
• Without the bridge loan the closing sequence for two properties on the same day would run something like this:
  
• Move all of your stuff into a couple of trucks a day or two before closing
• Have the home in "broom swept" condition by the time of the walk-through (probably 8:00 AM)
• Close on your current home at 9:00 AM
• Wait until the closing is recorded at the Registry of Deeds (about 2 hours)
• Close on your new home (probably 1:00 PM)
• Start moving in around 3:00 PM (What a long, hectic day!)

• If you use the bridge loan (as an example) for two days, the closing sequence for both properties would run something like this

• Move all of your stuff into trucks a day before or the day of closing
• Close on the purchase of your new home in the morning
• Move into your new home that same morning
• Clean out your current home the next day achieving “broom swept” condition by the walk-through tomorrow
• Close the next morning on the sale of your current home
  
• No matter how it's done, buying and selling at the same time is neither easy nor convenient.  But if you take some time to understand the process and the tools at your disposal it can be less hectic and a whole lot easier!
  

We'd be Happy To Assist With All Of Your Closing Details.

Please Contact Us At Any Time With Questions Or Concerns!

Doug Stamm - Re/Max Landmark

Email Address: HomeInfoSearch@comcast.net

Cell Phone: (508) 341-0989

Web Site: www.HomeInfoSearch.com