Dewayne:
You found your perfect house, but you still own your home. What should you do?
Dewayne:
Welcome back to another episode of our series 60 Lessons that We’ve Learned in 60 Years. Today we’re going to talk about should you sell your home before you buy another one?
Dewayne:
So there’s a few different strategies depending on your budget and what your options are. Ideally, yes, sell your home before you buy. If you have the option of interim housing so that you can make a strong offer with your home already sold, so that the seller on the flip side has more deal certainty. Now for families and other people, that’s just not practical.
Kirk:
Not easy, yeah.
Dewayne:
So should you sell your home before you buy? Well we have some strategies and some options.
Kirk:
One of the options is to the kick-out clause. Explain how the kick-out clause works.
Dewayne:
Okay. So you have your house on the market, and it’s a home sale contingency with your offer. Then you have a 72-hour kick-out clause. What that kick-out clause does is you’re in primary position. You’re moving forward. You’re getting the home inspection. You’re making a loan application. You’re getting the appraisal.
Kirk:
The normal stuff.
Dewayne:
The normal stuff. But if a back-up offer comes in that’s acceptable to the seller, now you have 72 hours to remove your home sale contingency or all contingencies actually, and move forward. So it gives you a first right of refusal.
Kirk:
Yeah.
Dewayne:
That’s what we primarily see, and a lot of times once you get so far into that process … You have a term, “don’t shoot the hen that’s going to lay the egg”. If they’re already so far along, a lot of times the seller is not going to accept a back-up offer, especially if their house is under contract. Let that closing happen.
Kirk:
Or we’ve seen them where they accept them as a backup and ask them to stay as a back-up offer.
Dewayne:
Yeah. That too.
Kirk:
So it pushes the first offer to closing without removing the contingencies.
Dewayne:
Then another option is, well at the house you’re buying, if it’s owned for free and clear, can they do some owner financing? That way you can close while you still have your house and then it makes the move a little bit easier. You can do improvements and you can move over time rather than having your moving truck at the closing table, waiting to get keys to go to the next property, which is really stressful.
Kirk:
Exactly. Then another option is a bridge loan. So you go to your local lender and say, “Hey, I want to borrow some equity out of the house that I live in. I want to borrow a little bit of money out of the new one I’m buying.” You combine the two, and you’re able to get … You’re going to end up paying two mortgages for a short period of time. But if you price the first house, your primary house correctly, it will be sold in probably 30 to 45 days. So it’s usually a pretty safe bet.
Dewayne:
Bridges the gap.
Kirk:
It absolutely does. Well thank you so much for watching us. We always appreciate your comments.
Kirk:
Next week we’ve got an interesting lesson on real estate. Join us next week.
Dewayne:
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