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6 August 2018

How to Help Clients Who Are Buying and Selling Houses at the Same Time

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Buying and selling houses at the same time is a balancing act for clients and real estate agents. Nearly simultaneous purchase and sale is challenging, but not impossible. Discover ways to help clients who are determined to buy and sell with minimal or no time in between the transactions.

Buyers Market vs. Sellers Market

Clients and agents must understand the benefits and disadvantages of buying and selling in a buyers market vs. a sellers market. During a buyers market, more homes are for sale than people who want to buy them. It is easy to find a house to buy but can take longer to sell one. In a sellers market, there are more buyers than available inventory. The client’s home might sell while they are still searching for a suitable home to buy. Both have a significant impact on the listing prices of homes. The local housing market trends also determine the timing. The time it takes to buy and sell varies in different areas, which is a significant consideration for sellers who are moving to a different region or state.

The Mortgage Matters

Sellers need to get a home evaluation to determine how much it can sell for in the current market. A pre-inspection lets sellers know the work required on the house or what concessions might need to be made for buyers to take care of the repairs. Then sellers should consult with a mortgage lender to determine the equity in the home and the mortgage products they qualify for to buy a new home. A pre-approval for a mortgage is essential to help them buy at the same time they are selling a house.

Other Financial Factors

Clients can ask a mortgage lender or bank about a bridge loan or home equity line of credit (HELOC). A bridge loan is a short-term loan to cover the down payment for a new home while the sale closes on the house the clients are selling. A HELOC lets the client borrow against the equity in their current home to get a down payment for a new one. The clients pay off the HELOC when the house sells. If clients rely on their savings, it is essential to ensure they have money for inspections, closing costs, and moving. If sellers feel confident their home will sell quickly, they can ask to extend the closing date of the new home past the standard 30-45 days. The goal is for your clients to have time to sell their current home and get the equity to purchase another one. This strategy works best in a buyers market.

Offer With a Settlement Contingency

A classic way to buy and sell at the same time is putting an offer on a new home with a settlement contingency. The sellers would have to agree to accept an offer contingent on the client’s home selling by a designated date. If the house does not sell, the potential buyer can get out of the deal. In the current market, there is a low inventory of homes. Doing this can make an offer less competitive. However, if the client has a strong financial profile and the real estate agent is dedicated to selling the home quickly, the seller may agree to the settlement contingency. This option works best in a buyers market.

Consider Rental Options

Even well-planned transactions may have unexpected timing issues. Three different rental options give buyers who are selling more breathing room. Encourage them to consult with their attorney and accountant before making a final decision.

  • Some buyers may need money from the sale of their home to buy a new one. Help these buyers find a temporary rental where they can live while they look for a house. The clients can accept the best offer on the sale of their home without worrying about timing. And they will be able to make an offer on their next house without negotiating for a settlement contingency. The profits and savings will pay for the temporary rental of a home for a few months.
  • Sellers can rent their current home at a price that is more than the monthly mortgage while they purchase a new one. However, as buyers, they will need to have the downpayment saved for the new home. And they will be taking on the responsibility of being landlords until the sale of the house.
  • Another possibility for sellers is signing a rent-back agreement with the buyers. The buyer permits the seller to remain in the house for a specific period in exchange for rental payments. The sellers stay in the house while they search for a new one to buy. The downside is this can reduce the number of offers on the client’s home as the buyers would need to be in a position to agree to this arrangement.

Time is of the essence for agents representing clients who are buying and selling houses at the same time. Present options to the clients immediately based on the current local market. Encourage them to work with a team that includes a mortgage lender, inspector, attorney, an accountant or financial adviser. An educated and pragmatic approach makes it possible to help clients tackle this timeline with ease. An agent who can pull this off is sure to get plenty of referrals in the future.

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