By: Sally Grenier
Broker/Owner
Grenier Real Estate
I've been running into this dilemma a lot lately. So many homeowners want to take advantage of this great seller’s market, but the problem is finding something to buy. If you’re staying within the same general area (where market conditions are similar), it can be a frustrating and trying proposition.
Generally speaking, in the Denver real estate market and Boulder real estate market, most homes (in good areas, in competitive price ranges) are going under contract within a few days, with multiple offers and usually going above asking price.
It’s even more difficult if you have to buy something contingent upon selling your current home (which most sellers do). This puts clients between a rock and a hard place. Sellers don’t want to list their home until they know they can successfully buy a new home. But you can’t get an offer accepted on a new home, until you have your current home listed, under contract and ideally through inspection & appraisal.
So…how do you sell and buy in this crazy hot Seller’s Market?! Here are some options:
1. Long Closing — This is when we list your house, get it under contract, and get all contingencies out of the way within 2-3 weeks (inspection, appraisal, loan approval, etc.). However, we negotiate with buyers to close 2-3 months out. Ideally, this gives sellers enough time to find a new home, get it under contract and have the closing date coincide with the sale of your current home.
Pros: No “double move” and no double mortgage risk. Most buyers in this market are more than willing to negotiate with sellers and are happy to accept a long escrow period.
Cons: Even with your home under contract, it may be a challenge to get an offer accepted with a contingency (i.e. If you’re competing with other buyers who don’t have a contingency). Also, you’re committing to an actual closing date. If you don’t find a new home during that time, you’ll be selling your home with nowhere to go.
2. Rent Back — This is when we list your house, get it under contract, and closed (within about 4-6 weeks) and negotiate a rent-back situation. After closing, you execute a “Post Occupancy Agreement” where you basically rent your house back from the new owners for a couple months.
Pros: Once your current home is sold, you’ll have better success at getting a new home under contract (without the contingency). No double move and no double mortgage risk. Many buyers are also open to this type of scenario.
Cons: Your rent will likely be higher than your mortgage payment was. Also, lenders will only allow a 60 day rent-back period. If you can’t find and close on a new home within that time frame, you’ll have nowhere to go at the end of the rent-back period.
3. New Construction — Most builders will accept contingencies, as long as your home is under contract within a certain time period.
Pros: You have your pick of beautiful, brand new homes. No “double move” and no double mortgage risk.
Cons: If you're building from dirt, it can be a 6-8 month process.
4. No Contingency — This is when you can qualify for both mortgages and don’t NEED to sell in order to buy. (Which means on paper you'd have to qualify for both payments and have $$ for down payment on the new place, which not many people can do). You then write an offer on a home to buy without a contingency to sell. Of course, we'd try to get your house listed and sold ASAP so it doesn't come to that.
Pros: No double move, and there is no pressure to get a contract on a new home.
Cons: Worst-case scenario is you own two homes at once (and have two mortgages to pay) for a short time.
5. No Contingency w/ Bridge Loan . Bridge loans are temporary loans that bridge the gap between the sales price of a new home and a home buyer's new mortgage, in the event the buyer's home has not yet sold. The bridge loan is secured to the buyer's existing home.
Pros: No double move, and there is no pressure to get a contract on a new home.
Cons: You have to apply for and get approved for a bridge loan.
6. Temporary Housing – This when we list your house, get it under contract and closed, and if the above doesn't work, then you'd have to find temporary housing while we keep searching for a place to buy. That could mean putting stuff into storage or a "Pod" and staying temporarily with family or friends, or getting a short-term rental.
Pros: No pressure to rush and buy a new home. No risk of paying double mortgage payments.
Cons: The dreaded "double move", having to pack and move twice. Finding short term housing can be difficult and rents are high.
The concept of selling and buying a home at the same time in the Denver/Boulder real estate market can definitely be a scary proposition and somewhat challenging, but it’s not impossible.
Having the right REALTOR working for you is the key to successful transactions. If you’re thinking of making a move, I'm here to help!
Sally GrenierBroker Owner
Metro Brokers / Grenier Real Estate
303.475.4508 CELL
sally@sallygrenier.com
www.sallygrenier.com