Sell to Buy: How to do it

What do you do when you need to sell your current home to buy a new one?

A successful sell to buy scenario ultimately comes down to the timing that works best for you and your situation. Most people can’t or don’t want to carry two mortgages at the same time, so let’s explore a few options to help you navigate this situation. ‍

Sell to Buy a Home: Seller's Contingencies

During the escrow period, when a home is under contract, there may be buyer contingencies in place. The seller could choose to include a contingency during their negotiation where they have a contingency to secure a replacement home before their current home can be sold. This becomes a bit more strategic in finding a buyer that can facilitate your timing and finding a property that works for you,, but if you’re prepared and efficient it can be as simple as moving from one home into another. Some buyers might be in a rental themselves or they might have a flexible timeline which can enable the seller to present a more compelling offer with their home already in contract.  

Sometimes this timeline doesn’t always line up - the seller can’t find a replacement home or the buyer can’t give the seller any more time. As a result, the transaction would be cancelled. The problem that you face in a traditional model is the minute you go on MLS, your days on market start ticking. In the event an offer falls through or a buyer backs out it leads to longer days on market which could negatively affect your listing with the buyer perception that something was wrong with the house, the price was high, and many other thoughts that are out of a seller’s control. Being able to take the time to find a flexible buyer and the right house takes the pressure off and keeps the seller in control of their home’s narrative in the market. ‍

One of the things that we’ve been able to do for sellers on Aalto is to test the market to see if there’s a qualified buyer out there who can create the situation and the flexibility for sellers to find a replacement property. Creating a transaction that fits your specific strategy is one of the many benefits of going direct on Aalto. ‍

Sell to Buy Options:

Rent-Back

In a perfect world there’s enough inventory for you to choose from. You feel confident in selling your home and you negotiate a rent-back for a period of time to find your replacement property.‍

If a buyer isn’t on a tight timeline, you may be able to arrange a rent-back.

A few things to keep in mind with a rent-back are:

• Monthly rent paid to the new buyer or reduced sales price
• If a buyer is getting a loan to purchase the home, the lender will typically allow for a 30 - 60 day rent-back, possibly longer, but it’s important to ask for your particular situation.
• Having a backup plan in place if you don’t find another home
• Moving and storage solutions so that you can operate efficiently based on your timeframe. ‍

Secure a Rental

Typically people don’t like paying rent when they could be paying a mortgage and building equity in their home. However moving into a rental alleviates pressure and adds an element of flexibility into the equation. Sell your home and walk away with the equity into an easy and flexible rental situation for a short period of time. Simple, right? Just be sure that you are seeing enough inventory that would work for you to purchase so you don’t end up in a long-term rental that will eat away at your down payment. ‍

Bridge Loan 

A bridge loan will enable you to write on a new property and bridge that gap until you sell your old home. With a bridge loan, a lender will loan you money for the purchase of a new home based on the equity in the old home. Bridge Loans are short-term interim loans with considerable higher interest rates. With mortgage rates at all-time lows, bridge loans are comparatively expensive but if it helps advance your real estate transaction and seamlessly puts you in your new home then it’s a viable option to consider. If you’re in a situation where a bridge loan could be an effective solution then it’s best to look at time saved (and headaches) over money spent if you feel your current home will sell quickly.‍

Other Notable Situations

In the event that you have someone like a family member acting as another financier or extending gift money you will want to disclose those details with your lender. If it is in fact gift money, some lenders need to see that money seasoned in an account for a period of time and will require a letter detailing the gift.  

Share your questions or comments with us at hello@aalto.com. We’d love to hear from you, and we’re here to help!