Month: September 2015

How to Buy and Sell a Home at the Same Time—Without Losing Your Mind

Ah, to be a first-time home buyer again: How easy it was to buy a home when you weren’t carrying another mortgage on your back!

buy-and-sell-split

If you’re looking to graduate from first-timer to repeat buyer, you know things are about to get much trickier. Unless you’re a bona fide house collector, you’ll have to sell your home in order to buy anew—adding a whole separate layer of anxiety to what you already know is a stressful home-buying process.

In an ideal world, you’d buy a new home, move, and then, and when all the dust settles, deal with the turmoil of selling. But for most people, that’s totally unrealistic. Not only does it cost significantly more, since you’ll be paying two mortgages, but sellers might be quick to judge if you’re holding on to your current home.

Take them seriously unless the house was on the market or in escrow. As soon as we put it on [the market], they were considered as serious buyers.

You can do this! If selling and buying simultaneously is the only way to go, here’s what you need to know to make sure both processes go as smoothly as possible.
Know the market first

Before you start seriously searching for a new home—or put your current home on the market—make sure you have a solid understanding of the housing market in your area (and the area where you’re planning to buy). Is the market weighted toward buyers or sellers?

Only then will you be able to fully strategize. As is so often the case, the best plan of action may differ depending on exactly who has the power.

That doesn’t mean to find one house you like and call it a day: Find multiple suitable options. That way, you’re less likely to find yourself in trouble if your purchase falls through—your newly sold home won’t leave you stranded.

Similarly, make sure to hire an appraiser and price your old home fairly. Now is decidedly not the time for delusions of grandeur: Two extra months on the market because you couldn’t humble yourself to lower the price means two months you’ll be paying double mortgages. Two very long months…
Plan your schedule carefully…

Should you buy first, then sell—or vice versa? Both have their risks and rewards. Selling first makes getting a mortgage easier, but it also means you’ll need to find a temporary place to live. Buying first means moving will be easier, but it also skews your debt-to-income ratio, making it harder to qualify for a new mortgage—not to mention the difficulty of juggling two monthly house payments.

It’s walking a tightrope. And we’re not just talking about scheduling: Your finances will be on the highwire, too. When determining whether you should sell or buy first, think beyond How can I make the move as easy as possible? Instead ask: Can I handle two mortgages? What if my home sells for less than its listing?

Whichever option you choose, make sure you’re prepared to accept the consequences: having to store your stuff and rent temporarily, or undergoing the financial burdens of dual mortgages.

… but don’t rely on timing

When buying and selling a home simultaneously, there are so many external circumstances. I’ve yet to see it really work smoothly and efficiently.

Remember: You’re not the only party in this equation. For every seller there’s a buyer, for every buyer a seller. While things might appear to be working smoothly when viewing your master plan from above, that doesn’t take into account the variabilities of other people. Closings are rife with delays. Your buyers might have difficulty securing their mortgage; your home inspector may bring up issues that need to be fixed before you can move in.

You’re relying on the seller of the place that you’re buying to be ready to move in concert with the buyer of your house.

So even if you’ve planned to sell your home first and are prepared to rent while buying, know that even the best-laid plans go awry—and you might end up juggling both mortgages. Preparing yourself for this (however remote) possibility ahead of time will ensure a smooth transition.
Know your financial solutions

For those who choose to sell first, the process is relatively straightforward other than the additional cost of a rental between homes. However, there is the option of a rent-back agreement, where you negotiate with the lenders and buyers to be able to remain in the property for a maximum of 60 to 90 days—often in exchange for a lower selling price or rent paid to the buyers. This can relieve some of the pressure of finding a new home, giving you additional time to house hunt.

But if you’re buying first, talk to your Realtor about ways to decrease your financial burden and risk. Here are the two most popular options for buyers:

Contract contingency: Buyers can request that their new home purchase be dependent on the successful sale of their old home. If you’re looking in a competitive market, this may not be a good option; however, if the seller of your intended home has had difficulty attracting interest, this may be a good deal for all parties involved—assuming you can convince them that your home will sell quickly.

Bridge loans: Bridge financing allows you to own two homes simultaneously if you don’t have deep pockets for a second down payment. This option is especially attractive if you’d planned to sell your home first and use the proceeds to buy the second. It functions as a short-term loan, intended to be repaid upon the sale of your original house.
Don’t let fear rush you

If your home has sold but you haven’t found a new place to live, don’t let anxiety push you toward a bad decision. Agents usually recommend thier clients pre-emptively plan on a short-term rental; so they don’t feel stressed or pushed into something that they would not normally be interested in. They shouldn’t make a purchase because they felt like they were pressured from the time constraints.

Found the perfect home right on schedule? That’s great. But don’t feel like you have to compromise on things that are important to you just because you need to find a home. Conversely, don’t accept a bid that you feel is too low just because your finances are strained by two mortgages. If you have a temporary apartment set up, you’re less likely to compromise.

Certainly, selling and buying a house simultaneously will be stressful—but carefully considering and planning for the risks and hurdles can mitigate the stress.

Advertisements

My Dream Home Is Pending Sale—Am I Too Late?

So you’re perusing listings and finally you find it: Staring back at you from your laptop screen is the perfect place you’ve been dreaming about.

sale-pending

It’s in the right location, has all the amenities you’re looking for, and still, somehow, fits in your budget. There’s just one problem: It’s pending sale.

Does that mean you’re too late? Is it entirely hands off? Or do you still have a shot?

The short answer: If a home you love is pending sale, don’t give up hope.

‘Pending’ does not mean ‘sold,’.

“Pending” means the seller has an offer but hasn’t closed yet. (This is different from a contingent sale.) A property is placed in pending status the minute a contract is executed. But there’s still a chance the home can be up for grabs again—say, if the inspection doesn’t check out or the buyer can’t pull together the financing.

Until the sale is a done deal, there’s still an opportunity to land that magical, marvelous dream home. In fact, there’s more wiggle room than you might expect, particularly if you’re looking in a market that’s competitive. Many sellers will want to hold out for the best bid—and that bid could be yours.

Here are five ways you can improve your odds, swoop in, and steal that home out from under someone else.
Make your interest known

Think you’re wasting your real estate agent’s time when asking about a pending home? Think again.

Many seller’s agents will continue to show the property to potential buyers up until the very last minute, in hopes of obtaining an even more compelling offer.

Make sure your agent knows how in love you are with the home. You’ll want to be first in line in case any issues crop up with the pending sale.

Remember: Until the ink dries on the contract, no transaction is legally binding.
Get the dirt

While you’re at it, call the listing agent. The agent might have some insight on parts of the deal that aren’t firm. Try to suss out how many other offers there are and whether there are any potential concerns about the initial bid. You can use those to your advantage in your own bid.

You need to get on the listing agent’s radar screen—and stay there. If the agreed-upon deadline to close the sale passes, it’s time to take action—and fast.

Try driving through the neighborhood to learn as much about the home and the community as possible. Do your homework. Google the address, check out property tax records, or go on PropertyShark and see what comes up. You may never need the intel, but who knows when details might help sway the odds in your favor. You could think of it as getting a head start on your research in case the initial deal does fall through.
Negotiate to beat the other buyer’s deal

This doesn’t necessarily mean putting in a higher bid—although that can certainly help.

If—and only if—you’re financially comfortable, you could consider offering more than the asking price. But you can also try presenting convenient terms to the seller. Maybe you want to agree to waive a mortgage contingency, pay closing costs, or offer flexible moving dates. Being open to negotiation is one of the best things you can do to improve your odds.

It helps make the case that you are serious about the property. Your goal is to convey a sense of urgency to the current owner and make your offer, quite simply, hard to refuse.
Use a personal touch

If you’re certain that this place is your dream home, tell the seller. Send a handwritten letter explaining why you want the property, and your hopes for it. That human connection could be a significant factor in the seller’s decision.

Be aggressive with a capital A

Err on the side of being pushy and tenacious, even if that isn’t your normal style. That way if the initial sale does fall through, you’ll be the obvious next bid. Be available for phone calls, check your email, and follow up with your agent often.

If the seller has a sense the competing would-be buyer is dragging their feet—or has any other seeds of doubt about their offer—this aggressive approach may end up tipping the scale in your favor.

So the next time you see that pending sale icon, don’t despair. Just be prepared to work a little bit harder for your fantasy home.

Is It Time to Downsize? Ask Yourself These 4 Questions First

When is the right time to “rightsize” to a home that’s better suited to your needs? Well, if you’re in the 60+ crowd (or have a parent in that demo), there are plenty of things that can go into that decision. Maybe you’re finding yourself in a (more or less) empty nest. Maybe you want to (finally!) get serious about retirement planning. Maybe all that maintenance on your current home is more than you can or want to handle. Or, heck, maybe you just want to simplify your life.

measuring-house

Whatever the scenario, you’ll find that you have plenty of company. The U.S. Census Bureau’s population projections forecast that the number of Americans aged 65 and older will more than double by 2030, increasing from 35 million in 2010 to an estimated 72 million.

Of course, getting older doesn’t mean you have to slow down or compromise on the lifestyle you want. It just means you have to make informed, calculated decisions on how best to achieve it. And that’s especially true when it comes to homeownership.

So if you’re thinking about downsizing, ask yourself these questions first:
Q: What kind of lifestyle do I want after I downsize?

For some folks, it’s a matter of living a simpler life focused on family. Some might want to cross off travel destinations on their bucket lists. Some might want a low-maintenance community with high-end upgrades and social events. Decide what you want to achieve from your move first, and you’ll be able to better narrow down your housing options.

Most folks come to South Florida for the warmer weather and amenities, and we’re seeing more seniors who are still working—because they enjoy it or want to have an extra cushion in their budgets.

The first move are retirees looking to enjoy their freedom, so they come down to Charleston to find active adult communities where they meet like-minded people that they can befriend easily. The second comes after retirees have enjoyed their freedom for 10 years or so and they decide to move one last time to live closer to family to have the physical, emotional, and spiritual support they need.
———
Q: What should my buying budget look like?

If you’re planning to retire soon or have already entered those coveted golden years, you’ll likely be on a fixed income. Downsizing might net you a decent profit, especially if the home you’re buying next costs considerably less than the one you’re selling. Consider other expenses as you age: medical bills, health and life insurance, travel, estate planning, final expenses, and home maintenance. The common rule of thumb: Spend no more than 30% of your monthly income on housing. But in theory, it should be a lot less if you’re downsizing.
———
Q: Have I built up enough equity in my current home to make a profit?

For most homeowners, the answer is yes. This is if they’ve held on to their properties long enough to have positive equity that will be sizable enough to put a large down payment on their next home. Unless you have a significant amount of debt to pay off, chances are you’ll see enough profit from your sale to buy your next home outright or bring a sizable down payment on closing day.

Most of the inquiries Haigh receives are from retirees from the Northeast who are looking to relocate to the South. A majority of those downsizing buyers have a winning hand in bidding wars since they walked away with a profit on the sale of their old home. They have the funds and solid credit history to pay all cash or provide a large down payment.
———
Q: Will I be able to find another home that’s affordable in a seller’s market?

OK, this is where things might get tricky. In some fast-paced markets (such as Denver or San Francisco) where soaring home prices show no signs of letting up, you might have a tougher time. If you’re relocating from a pricier part of the country such as California or the Northeast for states such as Florida or Texas, however, you should be in a better bargaining position than first-time home buyers.

Sellers who have the financial means to buy their next home first before selling their current one. We recommend they take out either an equity line of credit on their current home or a home equity conversion mortgage to finance their purchase, then pay off the loan when they sell their former home.

Since we have low inventory here in Charleston, buying their next home first gives my clients control over finding the perfect property instead of being rushed to find whatever happens to be on the market after their house is under contract.

After you’ve answered these questions and feel confident about making your next move, find a Realtor who can help you determine what your current home is worth and what market conditions are like in the town you want to relocate to.

Spending on Home Remodeling Is (Slowly) Improving

Americans are spending more on home improvements, but at a slower pace than a year ago. That’s potentially bad news for the housing market.

repairman-shutterstock_119412706

Spending by homeowners on property improvements is expected to reach an estimated $151.1 billion for the 12 months ending in the third quarter of this year, according to data released Thursday by the Harvard Joint Center for Housing Studies. While that’s an annual increase of 3.5% over the same period a year ago, the rate of growth has gradually slowed from a recent peak of 10% growth in the third quarter of last year versus the same period in 2013. Annual growth is projected to slow for the rest of 2015, it says, but then accelerate again by next year.

This tepid rate of growth in remodeling is supported by earlier research on the subject. The amount of money Americans have been spending per home improvement project has declined over the last five years, from $6,200 in 2010 to $4,100 in 2015. Still, spending on these projects has increased slightly from $4,000 last year, the latest American Express “Spending and Savings Tracker” survey concluded. What’s more, some 75% of U.S. homeowners plan renovations this year, up slightly from 73% in 2014, the research found.

Joint Center for Housing Studies, Harvard University

Graphic on remodeling activity

On average, Americans plan to spend $3,600 on indoor remodeling and $1,800 on outdoor remodeling this year, according to American Express, which surveyed 1,882 adults with an annual income of $100,000 or more. More respondents also said they are hiring contractors to do the work (21% in 2015 versus 15% in 2014) rather than doing it themselves. The most popular projects are renovating a room (an estimated 40% of all projects in 2015), followed by minor cosmetic work such as painting (31%) and landscaping (22%).

Spending on renovations helps the overall economy. Given that inflation-adjusted investment in residential structures remains well below its mid-2006 peak, any acceleration in remodeling would be serendipitous. But previous patterns of remodeling—relocation followed by renovation—have reflected the aging of the country’s baby boomers and should not necessarily be expected to continue.

Others are more upbeat about the prospect of a surge in remodeling. A major driver of the anticipated growth in remodeling spending is the recent pick up in home sales activity. (Sales of existing homes rose 5.1% in May, the fastest rate since 2009.) Recent homebuyers typically spend about a third more on home improvements than non-movers, even after controlling for any age or income differences.