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Here in the Orlando area, we have an inventory shortage happening. There are fewer houses for sale and the ones that are for sale are coming on and off the market fast! And if they are of any value at all, they are getting multiple offers, often the first day. (If they are priced anywhere close to market... there are still some crazy high priced houses out there!) This environment is making people that want to sell their current home and purchase a new home worried about how to pull that off. Especially when houses to buy are on and off the market so quickly with multiple offers. In an effort to help ease the worry of how to successfully buy and sell a home at the same time, we have come up with 15 different strategies that can be used to help make both happen at the same time. There are pros and cons to each of these strategies. I'll try to identify them here. Our goal is to educate and help you come up with the best strategy. Please lean on our knowledge if upgrading, downsizing or relocating is of any interest to you.
1) Carry Two Loans at Once - Check with your lender to see if your debt to income ratio is low enough to carry both loans at one time. It might stretch you thin for a little while, but that won't last long after your current house has been sold.
2) Borrow for Your 401K - We highly suggest you check with your tax advisor on this one. There may be penalties associated with doing this. If it makes sense to borrow from your 401K though, know that you can pay it back with the proceeds from your current house.
3) Sell Contingent on You Finding - The Florida contracts are written to give the buyers the ability to back out, but not the sellers. By selling your house contingent on finding the next house, it allows you to back out if there is nothing on the market that appeals to you.
4) Buy Contingent on You Selling - This one is a little tricky because it doesn't make your offer very appealing when compared to cash or offers with very few other contingencies. If you are going to buy a house contingent on selling your current house, we highly recommend that house be on the market already and preferably under contract. It is even better if you have already finished the home inspection period.
5) Live in Short Term Rental - Central Florida offers plenty of short term rentals. Although it isn't ideal to pack up and store your furniture and things and go live somewhere for a short while, it is an option.
6) Seller Financing - Some sellers will offer self financing where the interest rate is higher, but the loan requirements will be less strict. This is less likely to be available, but it is still an option.
7) Rent for a While - Similar to number 5, renting somewhere for a little while will take the pressure off of finding the next home. It does mean that you will have to move twice. The rental doesn't have to be for a full year. It could be for just a month or six months, whatever time is needed to find your next home.
8) Explore Less Competitive Prices and Areas - While there are certain price points and areas that are super popular and in demand, there are other price points and areas to are less active. Typically this is going to be further away from the city and in higher price points. Depending on your work and school situation, this may be a good option for you.
9) Find House Over Priced Before Drop - As mentioned above, there are still houses that are priced over market rate. These houses are still sitting on the market for days at a time. It is possible to identify these houses and if desired make an offer on the house in advance if it going through a price correction.
10) Extend Closing - This may be one of the ideal situations in the list. It is possible to find a buyer that can allow for a delayed closing (60 days, 90 days, etc.). The idea here is to clear all of the contingencies but delay the closing enough to allow you to find your next home and have confidence that your house will sell.
11) Lease Back - Another option is to find a buyer that will allow you to sell the house to them, but lease it back from the buyer for a period of time. Note that some buyer's loans will require them to take possession of the house as their primary home within a certain period of time. It is important to talk through this potential landmine with us.
12) Bridge Loan - This is a temporary loan that allows you to buy and sell a house at the same time. It helps to "bridge" the gap in the financing.
13) HELOC - This is a second mortgage on your current home allowing you to use the existing equity as a downpayment for your next house. This and the primary mortgage of your current house would of course be paid off when the house is sold. There would have to be enough net proceeds in the house to cover both loans and closing fees.
14) Purchase New - Because new builds don't require the next loan to actually start until you take possession of it, you can purchase a new build and then sell your house as you get closer to having the new build completed.
15) Buy Land and Build - Similar to the previous one, purchase land, which is usually much less expensive and then build a custom house using a construction loan. A construction loan will have lower payments until the house is completely built and ready for you to own it.
Like I said before, there are pros and cons to each of these strategies. Some of these are going to be subject to loan availability and approval. They may also require some additional cash on hand. If upgrading, downsizing or relocating is of any interest to you, please lean on us to help you identify the best strategies to allow you to sell your current house and buy your new home. What concerns you most about buying and selling at the same time?