Great Time to Make That Move You’ve Been Wanting to Make

Is this your scenario?

You’ve wanted to move to a new house for some time now. You know you can sell your current house in a heartbeat. You’re worried, however, about finding the next home given the crazy, super-strong seller’s market we’ve had in metro Denver for the last few years.

We have good news if this describes your situation. That outrageously strong seller’s market has morphed into a routine, run-of-the-mill seller’s market. Much of the multiple offer craziness is gone. It’s easier to buy a home.

The market still favors sellers, but it is much less wild and wacky and this makes it a good time for those people that want to move up or move down or just move around within the Denver area market.

The key to making a move like this is to have a clear strategy. Clarity on the game plan is a key to success. Below are the five options for the sell/buy transaction along with a list of pros and cons for each.

Strategy No. 1 – Sell with Contingency; Buy with Simultaneous Closing: You put your current home on the market and get a contract on it with a contingency that allows you time to find a replacement property. You then go find the replacement property and get under contract to purchase it with closings for both transactions scheduled to happen on the same day.

Pros: Convenience – no double move.

Cons: Stressful – You may not find a suitable replacement and have to kill the sale of the current home and start over. The deadline to find a replacement property may cause you to compromise and take a marginally acceptable property; You lose negotiating leverage on the replacement property because you’re under time pressure to get a deal done

Strategy No. 2 – Buy with Contingency; Sell with Simultaneous Closing: You find the replacement property and get it under contract with a contingency that gives you time to sell your current house. You then put your current house on the market and get a contract that has both closings occurring on the same day.

Pros: Convenience – no double move.

Cons: Stressful – Many sellers don’t want to go under contract with a buyer that has to sell another house that is not currently under contract. If you get under contract on a replacement property with a seller that will accept your contingency to sell your current house, the deadline to get your current house sold means you have to be less aggressive on your asking price; You lose negotiating leverage on the current property  because you’re under time pressure to get a deal done. 

Strategy No. 3 – Sell without Contingency; Buy without Needing Simultaneous Closing: You put your current home on the market without any contingency to find a replacement and get it under contract. You look for the replacement home and try to get one under contract that can close on the same day as the closing of the current home. If you can’t find a suitable replacement in time, you are prepared to move to temporary housing while you continue to look for the right replacement property.

This is a great strategy in a buyer’s market where prices are falling. You sell the current home before it loses more value and buy a bit later with a lower price on the replacement property. Since selling is harder in a buyer’s market, you get the difficult transaction done first.

Pros: You can sell your current home without undue pressure and at a maximum price because you are not under an artificial deadline to get it sold; You can be patient in finding the right replacement home – you make fewer compromises and you can negotiate harder to get the replacement property at a good price.

Cons: You may have to make a double move as you have to be prepared to move out of the current home before you’ve found and closed on the replacement home.

Strategy No. 4 – Buy without Contingency; Sell without Needing Simultaneous Closing: You find the replacement property and put it under contract without needing to have the current home sold to make the purchase happen. This often involves a bridge loan to have the cash for the down payment on the replacement property. You put your current home on the market and try to get it sold without being concerned about whether the closing occurs before or after the purchase is completed. If you can’t get the current home ready to close by the time you close on the replacement property, you use the bridge loan to complete that purchase. That bridge loan gets paid off with equity from the current house when it sells.

This is a great strategy in a seller’s market with strongly rising prices. You lock in the price on the replacement home before home prices go up more and you sell your current home at a somewhat higher on price when you sell it two or three months down the road. Since buying is harder in a seller’s market, you get the difficult transaction done first.

Pros: Convenience – No double move; You can be patient in finding the right replacement home – you make fewer compromises and you can negotiate harder to get the replacement property at a good price.

Cons: You may have a month or two of double payments while you get the current home sold after acquiring the replacement property; There is some uncertainty about the amount of money you will get from the sale of the current property – you don’t know your actual net proceeds until it sells and closes. You have to be less aggressive on pricing the current home and more flexible in contract negotiations since you don’t want to carry two house payments for too long.

Strategy No. 5 – Buy without Contingency; Convert Current Home to a Rental: You might elect to keep your current home and turn it into an investment property. You can buy the replacement home and then put a renter in your current home. This works well when you have a financial strategy to either accumulate assets or generate current cash flow.

Pros: Convenience – no double move.

Cons: You have an asset that requires management; You have to find tenants; You have to manage tenants and you have repair costs; You might have to evict a dead-beat tenant and this takes time and money. Much of this work can be delegated to a property manager, which saves you time but costs more money.

Sound confusing? It certainly can at first. It takes a bit of time to fully grasp the various strategies. We understand these options like the back of our hands and can walk you through them to find the best solution for you.