The single biggest challenge to homeowners moving up, and to a lesser degree . . . down-sizing, is how to do it without moving twice. Few homeowners can afford to buy a replacement home without first netting the proceeds of their old home. Moving from Point A to Point B in one move requires a thought-out strategy. Let’s consider the options.
First, the obvious choice is to contract for the replacement property subject to the sale of the old home. So-called “contingency contracts” are seldom accepted by sellers in a red hot market like Austin. Why should they, when they probably have ready and willing buyers lined up.
The second safe but labor intensive and expensive option is to sell, rent short-term, and then move again. Besides the hassle, the risk here is locating a suitable replacement home.
A third option, one recent clients used with success, requires refinancing the existing home with a cash out loan. My clients were fortunate enough to have mostly paid off their existing home. This allowed them to secure a cash-out loan against the old home, so that they could use it for a down-payment on the new home. Clearly, they had to be able to qualify for both loans. In this case, my lender coordinated both loans and facilitated a Frost Bank loan for the swing loan. This arrangement allowed my friends to make a more relaxed transition and more time to prepare the first home for a good presentation.
Finally, one very successful option is to buy a builder product. I have sold numerous new homes the past few years and it made my clients’ move much easier. First, most builders will accept contingency contracts if the new home is in the early stage of construction. This allows the homebuyer more time to prepare for the sale of the existing home. In the situations where the existing home was highly sought after, we were able to pick and choose our buyer. In several cases, we were able to negotiate a transaction in which we closed, but the new owners allowed the sellers to lease back a few weeks until the new home was completed. Sometimes the stars have to be aligned, but this strategy worked well for my clients.
PLEASE READ: Texas law requires all real estate licensees provide the Information About Brokerage Services (IABS) to prospective buyers, tenants, sellers and landlords. Please see the link above.
JEFF STEWART, CCIM, SRES
Broker Associate Stanberry, REALTORS