The Art of Selling a House In Order to Buy a New One (in a Hot Seller’s Market)

How NOT to end up "homeless" and how NOT to end up with two mortgage payments.

Right now homeowners all over the place are facing the same common dilemma:

"Should I sell my house and THEN find my new home, or should I find my new home, and THEN sell my house?"

The answer largely depends on whether you are in a seller's market or a buyer's market. If homes are selling in fewer than two weeks, for top dollar, after stiff bidding wars in your area, I've got news for you…

Here in the Greater Seattle-Tacoma area, we are in the midst of one of the hottest seller's markets in recent memory. What does this mean for you, the seller who needs to sell before you can buy?

It means that you will more than likely sell your house before you have time to find the next one, but only if you don't take the appropriate steps!

There are still significantly more buyers looking for homes than there are sellers putting homes on the market.

With that, we see homes hitting the market and receiving dozens of offers before ultimately selling for tens of thousands of dollars more than they were listed for.

One example is the Federal Way housing market last month where on average, homes sold for 107% of their list price.

For a $400,000 house in Federal Way, that translates to $28,000 above what the owners were expecting to get on their sale! Not only that, homes sold in just 11 days on average, in April.

Time is of the Essence

It is SO important that your timing is right. You first want to decide where and how soon you want to make your move. Are you prepared for your home to sell in 11 days and to be completely moved out within 30 days after that? What if you don't find the right house by then?

 Where does your mortgage company fit into all this? What about a real estate agent? Do you even need one?

There is nothing more stressful than the uncertainty of how "moving pieces" will land when you need to sell your home to buy a new one. So it is important that the agent you hire for the job is professional, knowledgeable, and most importantly, composed.

But I'm getting ahead of myself here!

Follow these steps to successfully sell your house and buy a new one, hassle-free in any seller's market, especially if you're in the Greater Seattle-Tacoma area.

A Proven Process

1.      Narrow your search

This is important because as mentioned above, time is of the ESSENCE. You will want to be ready to make a move on your next home as soon as you have completed step 2 below.

You should utilize the assistance of a buyer's agent (more on that below) or you can do your own searches to narrow your options early on.

The idea is to, in a way, dwindle your options down so that your approach is as focused as possible when it is time to start making offers.

Most people don't have the financial ability to buy a house while they own another house. If you fall under this category you should use this time to speak with a mortgage professional: find out what will be required as far as credit score, debt-to-income ratio, cash reserves, etc.

You want to know what it will take financially to get your home sold and to get moved into a new home, for the lowest out-of-pocket cost and in the shortest amount of time (with the lowest amount of stress!) possible.

If you do not have a preferred lender, you can search for one in your area or your real estate agent can provide at least a few to choose from. More about your agent below.

2.      Find the right listing agent

Ideally, this will be the same agent who is helping you find your next home to buy. This agent should have a solid track record in your geographic area. They should be well versed in the nuances of the selling and buying processes, competent, and well-composed.

Your agent must have the skillset to lay out a clear pathway to success that you understand and can get on board with.

From scheduling moving companies, finding you a suitable rental if you don't find the right house by the time your house sells, and all of the logistics in between -- your agent should be able to coordinate and make sure everything happens on schedule.

Hiring the right professional for this job is the MOST IMPORTANT piece and will make all the difference in your success.

Do not feel bad or disloyal for telling your real estate agent cousin, or nephew, or brother that you will be using an agent from outside of your relationship circle, to ensure this is done properly.

Remember, this is a business decision. So this should not be taken lightly or personally if you want to pull this off successfully. Doing favors for family and friends can come when there is not so much at stake for you.

3.      List your home for sale, and buckle up!

In this seller's market, you will know that you have hired the right agent when you start receiving offers within the first 14 days of listing your home for sale.

For that reason, you must be proactive in your home search from the moment you meet and hire your agent. When you find your perfect home it will be time to act fast and know your ideal purchase strategy.

4.      Find your next home (while your home is still for sale or under contract)

When you find your next home, here are a few options that you, the buyer who needs to sell first, can utilize to make sure that you will be in your new home in YOUR timeframe -- and not at the mercy of the market:

Contingent on sale offer. Ideally, you will find your next home while your current home is still on the market. Many decide the best route is writing a contingent offer.

Essentially, this is writing an offer to buy a house that lets the seller know that you are ALSO selling a house, and will be using the money from your sale to buy their house. 

This could give you a leg up, but usually, this is a riskier option for the sellers of your new home.

Think about it, there are SO MANY buyers looking for homes in the greater Seattle-Tacoma area these days, who don't need to sell in order to buy.

So why would a seller want to take the risk of your home not selling in a timely fashion, when there are so many buyers who will not need a contingency to buy their house?

One way your professional, knowledgeable, composed agent may get you around this, is by providing the seller and their listing agent a detailed market analysis explaining just why they will sell your home in a timely fashion.

If you're an agent like myself who regularly sells homes in less than 30 days, you have a higher probability of the seller and listing agent accepting the claim that your house will sell fast enough to purchase theirs.

This is especially true if you have already accepted an offer on your house! This is also a KEY reason why your hired real estate agent should be an excellent communicator, with a solid track record in your area.

Sell and close first. In a strong seller's market, this is the less risky option for you, the buyer who needs to sell first. This is because you will not have to wonder where you will be living if your house sells too fast for you to find a new one.

By this stage in the process, your professional, knowledgeable, composed real estate agent will have helped you set a clear timeline, find an ideal rental in your price range, coordinate moving arrangements, etc. so that ALL you have to do at closing is collect your check and continue looking for the right home.

In my experience, this has been a good option for those who don't mind waiting a few months to find their perfect next home -- much less pressure as you won't need to have everything figured out in just a few weeks.

Leaseback option. Some buyers do not have the urgency to move into their new house immediately after closing. Continuing to live in your home after closing, and paying the new owners fair market "rent" every month you will stay, sure beats having to move everything out into storage (or to another rental), and then into your new home months later when you finally close on one.

This is the most ideal option for most home seller-buyers like yourself, although it is rare because many people expect to take possession of their property once they have paid their money (understandably so).

One example of a successful leaseback agreement is a high-rise condo in the Pacific Avenue business district of Tacoma that I sold a couple of weeks ago. My sellers are moving to a new construction retirement community in Idaho, after closing.

It only took 4 days for us to find the right buyer, so my sellers planned to rent another condo while waiting for their house in Idaho to be completed in September.

As it turns out, the buyers of this condo have another property in Lacey, WA that they are in no rush to move out of, so they allowed my sellers to stay through September for a monthly rental amount of $2,000.

This will save the sellers thousands of dollars and a load of stress in relocating to another state.

Leaseback arrangements are rare but they do happen, especially among condo buyers and sellers. This is because in many cases, condo owners are investors or landlords who have at least one additional residence that they can live in while the sellers get their affairs in order.

5.      Accept offer/close on the sale of your current home

Once you have both your current home and your new home under contract, this should be where you lean heaviest on your professional, knowledgeable, composed agent to make sure all deadlines are met, and the transition to your new home or rental is seamless.

By this stage, you will have a clear roadmap outlined by your agent, and there should be no surprises. You should hear from your agent every 48-72 hours with status updates and confirmation that everything is moving forward with both transactions. 

Other considerations/final thoughts

If you can afford to pay two mortgages for an indefinite amount of time, that is likely the least stressful option, involving the fewest steps to sell your current home to buy your next one.

As I mentioned above though, many of us are not in a financial position to foot the bill for two mortgages, so the other options I mentioned are likely far more attractive.

Don't forget the HELOC option

Another tip I wanted to mention to conclude is that if you have equity in your current home, you could take out a home equity line of credit, or "HELOC" to use toward the down payment of your new home.

You would just have to pay back the difference straight from the proceeds of your home sale at closing. This option could be a big help in reducing the overall monthly mortgage payment of your new home or even be the difference-maker in whether or not you can qualify for another mortgage through your lender.

If you need to sell your home to buy your next home, I guarantee that following these steps and tips will put you in a more competitive position than most, in a strong sellers' market like the greater Seattle-Tacoma area.

For the sake of this not becoming a 20-page instruction manual, the intricate details of each step were condensed for conciseness.

The VERY FIRST, MOST CRUCIAL STEP is to make sure you have a solid game plan in place. If you need to sell your home in order to buy your next one, contact me for a free consultation today!