Buying a home while also selling one takes research, planning, and flexibility. Read on to learn how to prepare for common situations, and unexpected delays, while buying and selling a New Orleans house simultaneously.
In an ideal world, you close on a new home the exact same day you sell your old home, avoiding a rocky transition and having to pay two mortgages, but that’s almost impossible to pull off.
Having to sell your house at the same time can add even more anxiety to the already-stressful process of buying a home in New Orleans. Pulling off paying two mortgages is unrealistic for most people, requiring them to sell a house in order to buy a new one. Most real estate experts would also tell you that orchestrating the same-day closing has as slim a chance as, say, winning the lottery. And, unless you’re actively selling your house, you may not be considered a serious buyer and miss out on some great deals. Despite all the difficulties, there are financial, legal, and common-sense scenarios and considerations that can help relieve stress and ensure a smoother transition.
Do Your Research
What’s the housing market in the area like? Does it lean toward buyers or sellers? Many real estate experts would tell you that in most U.S. markets one should sell first in a buyer’s market, and buy first in a seller’s market. Knowing whether the local market favors buyers or sellers can help strengthen your position, and, if need be, focus your efforts on one task over the other.
Buy or Sell First?
Good question! Selling instead of buying first is usually recommended, but both options have pros and cons. If you buy first, you’ll have to be able to handle two mortgages. With the new debt-to-income ratio and depending on what shape your finances are in, you may have difficulty qualifying for a new mortgage. Buying first, however, removes the problem of having to find somewhere to live, making the process of moving easier. Selling first means you may find yourself temporarily homeless, but getting a mortgage will be much easier without a new mortgage to impact your credit score.
Prepare for the Consequences in Either Scenario
Either way, determining whether you can handle two mortgages, or whether you’re prepared financially and emotionally for the fact that your house may have to sell below asking price, can help you plan your next move. It could mean the difference between homelessness and having a place to live. Having the forethought to budget for two mortgages and set up some storage options could save you thousands of dollars.
We also recommend hiring a home appraiser to set a fair price for your home. Otherwise having unrealistic expectations may cost a few extra months of paying two mortgages.
… And the Unexpected
Expecting the unexpected is a good habit to have, especially when it comes to real estate. Situations such as last-minute home repairs, buyers getting cold feet, or having trouble securing their own mortgage have been known to crop up right as things are being finalized and completely derail the plan already in place. Anticipating delays in closings and unforeseen issues beyond your control can help reduce the stress of buying and selling a house at the same time.
Stress-Relief Financial Options
There are a few financial and legal options that can help ease the transition and extend house-hunting while protecting both the sellers and the buyers.
- The rent back agreement protects homebuyers when the seller is not ready to move out. For example, if you’re the seller that means you could stay for up to 90 days and pay rent to the buyers or exchange the agreement for a lower selling price.
- The house sale contingency clause for home purchase contracts “gives buyers a specified amount of time to sell and settle their existing homes in order to finance the new one.” This protects buyers in case their home doesn’t sell for the asking price so that they can back out of the contract without legal consequences. The seller can cancel the contract if the buyer’s house doesn’t sell within a specified time, but the conditions of the clause also mean waiting and potentially missing out on other offers.
- A Bridge financing option helps secure a short-term loan, which is especially useful if you’re using the proceeds of your house sale for the down payment of your next home. The main benefit is that the bridge loan allows you to buy a new home without a contingency to sell.
- Using your New Orleans home as a short-term rental is an option if your home doesn’t sell within your original timeframe but you’ve already bought a move-up home. It adds the burden of becoming a landlord but will help cover mortgage payments. Similarly, if your house has sold but you haven’t bought another one yet, renting short-term is the way to go.
Buying a New Orleans home while selling one takes research, planning, and flexibility. Lining up the two closings concurrently, bearing the burden of two mortgages, having to find a temporary place to live and store your belongings, or renting out your house while it’s on the market — these are all factors simultaneous buyer-sellers may have to deal with at some point. To ease the process, contact us for help navigating your choices in the New Orleans market and designing a strategy that works for you.