MANGROVE REALTY ASSOCIATES
Lori Madden, MANGROVE REALTY ASSOCIATES
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How to Sell Before You Buy

by Lori Madden 08/02/2020

Photo by Paul Brennan via Pixabay

If you’ve been renting and preparing to buy a new home, you’ve probably saved up your down payment and are in the process of getting pre-approved for your mortgage loan. If, on the other hand, you’ve been living in a home you own and paying on your mortgage, you may be ready to buy, but only if you can use the equity in your existing property. Logically, that would mean you have to sell your home first, which pays off your existing mortgage, then live somewhere temporarily while you shop for your new home. However, you have more options, and none of them require you to live in a third location.

Option 1: Contingent Purchase

Ask your real estate agent for in-depth information on contingent purchases in your area, since different cities and states can have conflicting rules. This means making an offer on a new home that is “contingent” on your accepting an offer on your current home. Basically, you will do the buying and selling parts of your real estate plan at the same time. While your agent is looking for new homes, they are also showing your home to buyers. You can use the same agent for both parts of the process, which is often cheaper, or you can use a buyers’ agent for the purchase and a sellers’ agent for the sale, which may help you get better deals. Not all sellers are willing to entertain contingent offers since that can put a crimp in their own moving plans, so make sure your agent is aware of your circumstances from the beginning.

Option 2: HELOC Loan

Home equity line of credit or HELOC is a particular type of home loan. These loans are usually second mortgages of some sort but allow you to withdraw the entire amount within a given time period. This means you can keep your current home, and use the HELOC loan to buy your new home. Then, when your current home sells, pay off the mortgage on that home, and get a new mortgage on your new home to pay of the HELOC loan as well. This can be risky, however, since HELOC loans are based on the equity value of your current home, which may not be as high as the market value. In addition, they can have variable interest rates, which, if your old home ends up not selling for an extended period of time, can really start to drain your savings. If you plan to go with this option, make sure your real estate agent knows the timelines you’re working with, and try to find an agent with a “sellers’ guarantee.”

Option 3: Contingent or Rent-Back Sale

A contingent sale is similar to a contingent purchase, but instead of closing relying on you finding a buyer, it relies on you finding a new home and that offer being accepted. These tend to be shorter-term agreements, such as 1 to 2 weeks, but can be longer, even up to several months, depending on your buyer. Be careful and try to have contingencies on only one side of your purchase, since if you end up with too many chained together (you are on contingency, as are your buyers, and their buyers and so on) if one person’s plan doesn’t work, the whole chain could fall through. Alternatively, if your buyer has a longer moving timeline, they might be interested in setting up a “rent-back” agreement. This allows you to sell your home and then rent it back from the new buyers for either a specific time period or for as long as it takes for you to find a new home. This is especially a good idea if your buyers are currently renters on a month-to-month agreement since both of you can move whenever is needed.

If you’re ready to buy a new home, but are worried about selling your current one first in order to afford it, you are not alone. Make sure you explain your situation to your real estate agent during your very first meeting. Once they know what kind of agreements will work for you, they can do a much better job of finding your dream home and helping you complete the purchase.

About the Author
Author

Lori Madden

As a Florida native growing up in Sarasota, I have seen my hometown grow from a sleepy coastal town to a highly sought-after destination along the shores of the Gulf of Mexico. After working in Chicago for 5 years, I returned to Sarasota and saw it through a new lens and really began to appreciate what makes Sarasota so desirable, including temperatures that allow for year round outdoor activities including tennis (a personal favorite), golf, boating, kayaking, fishing, paddle boarding, or just relaxing and/or shelling on our pristine sandy shores, including Dr. Beach’s #1 beach in the United States for 2017, Siesta Key! Sarasota’s cultural amenities are many and diverse, appealing to a wide range of arts lovers. Downtown Sarasota has become a destination in itself, drawing many new developments for those who want to be within walking distance of Main Street's offerings and the picturesque bayfront and marina. Foodies will find an eclectic mix of locally owned and operated restaurants offering something for everyone, and there are now Farmers Markets every day of the week in various locations throughout Sarasota, but the Saturday morning Farmers Market in downtown Sarasota draws the biggest crowds. Since 1988, my passion has been selling real estate, representing both buyers and sellers. I have been recognized by my clients and customers for an uncompromising work ethic and dedication to helping them achieve their real estate goals. Relying on my experience as a real estate paralegal and being highly organized, I am able to help make the transition between contract and closing a smooth one for my clients. With an eye for interior and landscape design, I've been known to pitch in and help Sellers minimize and/or reorganize their belongings in order to stage their home to maximize its sale potential. I specialize in out of state buyers looking for their piece of paradise along the Gulf Coast and make it a priority to keep them up to date on our quickly changing local real estate market. I welcome the opportunity to share with you all Sarasota and her surrounding islands have to offer!