Solutions for buying before you’ve sold
Getting impatient? Do you want to make an offer on your next house while still owning your current house? Of course, you will want to be prepared for the worst-case scenario – being obligated to pay your current mortgage while waiting for a buyer and finding the perfect move-up home in a tight market that will require an offer be made with an accompanying significant deposit.
So what happens if you get caught in an indeterminate state? The following contains a short list of remedies if you do indeed find yourself in a potential financial pickle.
Rent your house back from your buyer
If you find the perfect home but have to wait for the owners to vacate the premises so you do not have to incur the time and expense of moving twice, is to sell your house first, then rent it back from the new owners until the purchase transaction for the new home can be completed. Ultimately, your buyer will want to occupy their new residence, but renting back can as noted, not only allow you to avoid temporarily moving into a rental, but additionally offer respite from having to live in your new dwelling if repairs are needed, which may cause occupant inconvenience and/or hardship.
The “questionable” transaction: contingency purchase
Though you may have trouble having a seller agree to a prior-sale contingency, the offer may be accepted if you have the luxury of looking to buy in a buyer’s market – especially if you are willing to make a full offer with few stipulations. If agreed to, this type of deal gives you the legal right to withdraw your offer with all but incidental financial implications.
Seek out a “carryover” loan
If you cannot fathom walking away from the perfect dream home you find, yet still have not been able to receive a desirable offer on you existing home, consider contacting your lender to apply for a “carryover” – or more well known in the industry – a bridge loan. A bridge loan would allow you as a buyer to move forward with the purchase of that “dream” home despite your current residence remaining on the market by enabling you to borrow from existing equity until the proceeds from the future sale of your home are obtained. Bridge loans are usually considered a last-resort choice though, as their rates are usually far higher than other financing options – and get prohibitively expensive if carried for any extended amount of time.
Sign a short-term rental contract
If you want to take the pressure off, sell your current house and take your time looking for a new house. How? Sign a short-term rental agreement to get a competitive rate while not tying yourself to a financial commitment too long. Though you will be obviously spending some of your home sale profit on rent – and you will be required to be inconvenienced and move twice – overall, you will have a fair amount of money in the bank from the sale of your home and have a far less stressful time constraint while searching for a new home.