I am back today with David Lawver from Kal Financial discussing how to get from your current home and into your next one. Should you buy first? Should you sell first? Or should you own 2 homes at once?
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There are typically 4 ways to get from your existing home to your new one.
1. Temporary Rental: This might be the simplest, but not the most convenient. You sell your home, rent a property for 3-6 months, and then move into the home you eventually purchase. This involves moving twice, which most people like to avoid. This usually leads to other options.
2. Make a Contingent Offer on Your New Home: This means you start by locating your next home, then write into the offer that the purchase of that property is contingent on the sale of your current home. In the market we’re experiencing in Silicon Valley with low inventory and high demand, this offer doesn’t stand a good chance of being accepted.
3. Contingent Sale: In this option you would start by listing your home for sale, but the sale would be contingent on locating and purchasing your next home. Basically, you would tell the buyer who presents the final offer that you can only sell your home once you have found another. This option has a higher possibility of working in our Silicon Valley market, but it still puts you at a disadvantage when you’re buying because your offer would still be contingent on closing escrow on your current home.
4. Sell Your Home and Rent Back until You Buy: In this option you would sell your current property but request that the buyer rent the home back to you while you find your next home. Usually lenders will not allow rent-backs for longer than 60 days, so you have to be swift if you’re going to do this. If you add in the 30-day escrow period, you would have around 90 days to locate and move into a new property, which is manageable with the help of a skilled agent.
The final option would be to utilize a bridge loan. This works best for people who are equity-rich and cash-poor. They get a loan against their equity to provide a down payment on the new purchase. They are then able to buy and close on a home while still living in their existing home. This allows people to sell at their own pace. Neither escrow is contingent upon the other. The downside is that you must qualify for two mortgages.
So, a bridge loan is your best option, but you have to have a large income and great credit. The second best would be to sell your home and then do a rent-back. These are the two best options in our Silicon Valley market, so consult your local real estate expert for the best options if you’re operating outside of our local market.
If you’re nervous about this process, keep in mind that we are willing and capable to provide you with assistance. Feel free to contact me to discuss your situation, or to talk about real estate in Silicon Valley in general.