Legal Option Title Agency, Inc.

Always sell before you buy.  It may sound like common sense, but if you’re like many sellers, you probably started looking at open houses before you even thought about the steps to sell your current home.

Why Sell First?

Most experts agree that you should close the sale of your home before committing to another piece of property.  Doing this virtually eliminates the financial risk.....you’ll know how much money you have for your down payment, and you won’t have to arrange for interim financing.

I Sold My House Before Purchasing My New One

If you can negotiate a sale-leaseback, you can rent your home from the buyer for a month or two while you look for your next house.  If you can’t arrange to rent your current house, you will probably have to rent a home temporarily.....but it’s usually less expensive to pay rent plus moving costs than to pay two mortgages plus taxes and insurance for several months.  It is almost always better to sell your current home first, and your lender may require it if you can’t qualify for interim financing.

Selling Before You Buy

If you’ve started looking for another house and your own home isn’t already on the market, stop shopping and start preparing your house for sale.

• Know your home’s value

            Get three comparative market analyses (CMA) from three potential listing agents (or an appraisal if you’re selling the house yourself) to determine your home’s approximate value.

• Get pre-approved

            Estimate the minimum amount of cash you can expect from the sale and get pre-approved for a loan.

• Get an inspection

            Order a pre-sale inspection of your home and make the necessary repairs and decorating changes.

• Launch your sale

            Now you can enthusiastically start shopping for your next home.

• Mind the timing

            If you haven’t found your new home by the time you accept an offer, negotiate a long escrow or a sale-leaseback.  If the buyer wants to close quickly, arrange for   temporary housing. Avoid making an offer on a new home until most of your purchase contract’s contingencies have been completed.

• Close your sale

            Deposit the proceeds while you look for your next house.

Buying Before You Sell

If you find yourself in the position of buying before you sell, managing the two transactions becomes more complicated.  If you’ve already made an offer on a new home:

• Structure your offer

            Negotiate to include a long escrow, or make the purchase contingent on the sale of your current home.  Such a contingency is a seller’s nightmare, but in a slow market the seller may be willing to accept the offer. More importantly, it gives you an escape if your house doesn’t sell. You may want to consult a real estate attorney on the exact wording of your contract.

• Start preparing your house for sale

            Consider pricing carefully.  You may need to list at a lower price to speed your sale. You also may have to offer incentives such as a home warranty.

• Find a lender

            Secure interim financing so that you may purchase your next house while your current house is for sale.  Using your existing house as collateral, you take out a “swing” or “bridge loan” for three months to five years to use as the down payment on your new home. Once you’ve purchased your new home, you sell the old one and pay off the mortgage and the swing/bridge loan.

• Focus on selling your house

            Help the agent any way you can, and maintain the home’s appearance. If you get an offer you want to accept, verify the buyer’s creditworthiness, avoid any contingencies that could delay closing, and try to schedule a closing date before the closing of your other purchase contract to avoid interim financing.

• Follow through with your purchase

            If you have not sold your house, and your purchase contract on your next house does not have a contingency that allows you to back out, you are still committed to the purchase. Consult with your agent and a real estate attorney.  If you proceed with the purchase, adjust your budget and consider different options to sell your current home.

• Close

            Close on both sales, or close on your home purchase only.  If the latter, continue your sales efforts until the market slows. Consider briefly taking your home off the market and renting it out until the next shopping season.

• Ownership

Real property may be owned by a sole owner, or it may be owned jointly by two or more persons.  A person who is the sole owner of a parcel of real property is said to be the owner thereof in severalty.  Concurrent ownership or co-ownership, on the other hand, means simultaneous ownership of a given piece of property by two or more persons.

Please consult an attorney if you have questions regarding the best way to hold title, as personal circumstances often affect this decision.