How to Move Up to Your Next Home with Ease Week 4
My 5-part series is a “how-to” guide for moving up to your next home with as little stress as possible.
Whether it’s your first time moving up or you’ve done it before, this series is a great resource. This time around, you’ve got more to think about, plan, and “get right” then when you bought your first home.
This article is for those move-up buyers who need to sell their current home first before buying their next home. Most likely, your lender has approved you only for selling first, then buying.
If you haven’t yet read last week’s article, The Big Move-Up Buyer Question: How Do You Buy and Sell at the Same Time?, go back to read that first. That way you’ll know which option you plan to do first — sell or buy your current home. Next week, we will cover buying first.
Let’s Get Started
At this point, you should know your criteria for this next home, your budget, and a neighborhood you’d like to focus on for your home search. You want to be fully prepared and ready to go whether you are selling or buying first.
Please read through the other articles in our series if you haven’t already since they will show you how to be prepared for this step: Should You Move or Stay? and What Move-up Buyers Need to First Ask Themselves.
Sale of Home “Contingency”
One of the first things you can do is to determine if you could have a “sale of home contingency” in the area you are looking in.
What this means is that when you put an offer on a home, you will add a contingency that says that you need to sell your current home first in order to purchase their home.
In neighborhoods where the real estate market is strong, no seller is going to agree to let you write a contract on their home if you still have one to sell. They’ll have other more attractive offers to consider.
Even if they do accept your offer, they will likely be less negotiable on other terms, such as price.
So, unless you are buying in a very depressed market where sellers are desperate, then avoid a “sale of home contingency” at all costs. You’ll just be paying for this convenience in other ways.
However, if this is an option where you are looking for homes, then go for it. You’ll need to have your current home ready to put on the market quickly and then put in an offer on that home with a “sale of home contingency.”
In North Carolina, we do not technically have contingencies in our contracts. Instead, we have a due diligence period and, as a buyer (not a seller), you can back out of the purchase contract during this period for any reason, and still receive your earnest money back. You will lose your due diligence fee. So, you should do your best to set the due diligence period so that you either close on the home you are selling or feel very good about the likelihood of doing so, prior to the due diligence date. You can still terminate the contract prior to closing, but you will lose both your earnest money and due diligence fee.
Another Option — Make a Plan
There is another way to make this move happen without relying on a “sale of home contingency.” And here’s how:
Follow the next three steps so you can time it all to sell your home and still buy your move-up dream home.
1.) Find the house first, just don’t buy it.
This is going to be emotionally hard, but otherwise not difficult to do. Before you sell your home, you need to know where you’ll end up once you’ve sold the home you are in.
Start looking for a home now, but you cannot, we repeat, you CANNOT buy a home right now! That train left the station when you made your decision in last week’s article. And, most likely, your lender has approved you only for selling first, then buying.
The reason you need to look for a home now, though, is to make sure that what you are looking for is attainable, realistic, and going to happen once you need to be out of your current home.
Think of this like window shopping for a wedding dress or car or some other big purchase other than a house.
You are deciding WHERE you are going to buy it and WHAT you are buying; you even know what you are going to pay, but you aren’t actually buying it yet. That’s the level we are aiming for here.
Most of the time, our move-up buyers just need to get more familiar with the options and what house they can get for their budget.
Once you feel like you know where you’ll end up, and the homes in that neighborhood fit your criteria and budget, you are done with this step…notice we didn’t say buy a house, you just know where you will be once your home sells.
2.) How to time everything to make sure you get a new home when you need one.
Now that you know where you will end up once your home sells, you need to know how often homes do come up in that neighborhood and at your price point.
Your agent can easily send you a list of what has sold over the last 12 months so you can see the pace of sales and the likelihood of one being available when you need one.
This pre-planning can give you an idea of timing and any constraints you might face in that particular neighborhood. Be sure to understand the flow of the market where you are both buying and selling.
For example, if you were to sell or buy around the holidays, it would be more difficult to time everything. There are not as many homes on the market for you to buy and less buyers out there for you to sell to.
You’ll need to decide whether to wait to make the move up to a more prolific time of year, but that can also have its challenges since you will face more intense competition from eager, serious buyers.
That’s why it’s important to work with your agent now to determine what’s best for the neighborhood you are looking in and the neighborhood you are selling in. You can start talking a year from when you want to move or sooner, but always craft a plan to take into account all of your specific factors.
3.) Focus on selling your current home.
At this point you know where you are headed and the likelihood of a home being available that fits your criteria and budget when you need one. Now it’s time to turn your attention to your current home and getting it in show-shape.
Remember that your ultimate goal is to move to a new home that is better suited for you and your family now. Keep that in mind and be willing to do what it takes to sell your current home in a timely manner.
But, don’t shortchange yourself, look desperate or do anything that will prevent you from buying your next home.
Once You Sell
Congrats, you’ve sold your home and now you have to find a new home that you will actually buy!
Hopefully, you’ve found buyers who are flexible themselves. That’s why it’s important to create a workable relationship with them. Remember to be cordial and flexible with your buyers and they may do the same in return.
Here are some options to help give you some time to find and close on a new home
- Rent back your old home after the closing for a month or two. The buyers of your home may agree with this if they really want your home and have flexibility themselves (maybe first-time buyers who are not juggling another sale themselves.)
This gives you time to go find a home, close and move during this month to 2-month time period. Because you’ve done all your homework as we mention above, you already know what neighborhood to focus on. Your agent also can do some marketing to entice homeowners to sell their home or maybe there is already one on the market for you.
With a rent-back, you already have your funds from the sale of your home, and don’t have the debt so your lender can now approve you for the purchase of your new home without a sale of home contingency. Most rent-backs can’t last longer than 60 days from the settlement of your previous home because of owner-occupancy rules and regulations.
In North Carolina, you can put an offer on a new home before your old home sells, because you can terminate the contract at any time. Just remember, you will lose your due diligence fee and possibly your earnest money depending on the timing, so consider these amounts carefully. You may want to wait until you close on your existing home before you start making offers.
- Find a place to stay between homes. If you run out of time or have no other immediate options, then put your stuff in storage and find a short-term rental (or even stay with family). It’s not an ideal situation but it prevents you from making a drastic or desperate purchase of a new home. That’s a long-term decision so if you need to be inconvenienced for a few months, it might be worth it to get the perfect next house. Remember, your ultimate goal is the new home.
I know this can sound confusing, but it’s easier than you think. Of course timing and planning plays a huge role in making sure the steps above go on without any hiccups or hassles.
Reach out to me (firstname.lastname@example.org) to schedule a meeting so we can put together a plan based on when you want to be in your next home and we’ll work backward to make it happen.
Contrary to popular belief, the time to talk to put together a plan is months, even a year, before you want to move if possible, so the more time before you are ready to take action, the better!
Next week is our final installment and it will show you what you need to do to buy your next home first and then sell your current one, if you have the approval of your lender to do so.
Hi, I'm Kim Crouch, and I help people who want to live in Wilmington near Wrightsville Beach, and aren't quite ready to move yet, figure out how to buy their NC coastal home now.
1001 Millitary Cutoff Rd Suite 101
Wilmington, NC 28403
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