The Challenge of Repositioning
February 21, 2014 | Buying
You own a house. You need to sell it to buy another because the one you own is too small, too large, too old or in the wrong area. Or, you’re just tired of it. Or, there has been a marriage, a divorce, a death, a job change, or … well, the list is endless.
Repositioning is one issue that DOES NOT tend to change from one type of market to the next. Whether we are in a buyer’s market, a seller’s market or a balanced market, the main concern when selling one place and buying another is pretty much always the same – TIMING.
If it is a strong buyer’s market, it is easy to find a new place, but you worry about getting the old one sold. Vice versa in a seller’s market, where you know your current property will sell quickly, but it may take a while to find a replacement.
In short, you tend to be concerned about having double payments or having to make a double move.
It turns out that the key to repositioning is to be clear-headed about the options. A lot of unnecessary angst is created by not stopping to identify the possibilities. There are basically three strategies:
Option 1 – Buy Then Sell: You can find the new property and close on it and then sell the old place. This requires that you qualify for the replacement home while continuing to own and make payments on your current place.
This is the best strategy for our current seller’s market. You get the harder part of the transaction done first by finding and buying the next home. You also get that property sooner before prices go up further. Frequently, we can time it so that you have an extended closing time on the new place and by the time it closes, it is likely that your old place will be under contract and about to close, thus minimizing and even eliminating any double payments.
Option 2 – Sell Then Buy: If you can’t qualify for two homes, this is the next best strategy for a seller’s market. You get your current place under contract and close on it. You are prepared for a double move where you put your stuff in storage and find a short-term living situation while you look for the right replacement property. The advantages here are that you avoid double payments for housing and you avoid undue pressure in finding the next home. With the pressure to find the next property removed, you can wait for the right home and not make unnecessary compromises.
Option 3 – Coordinated Sale and Purchase: This option has you selling your current home and closing on your next property on the same day. You move right out of the old place and into the new place. It has the obvious advantages of avoiding both a double move and double payments. The downside is that it is harder to pull off in a seller’s market. You need to get a seller to accept an offer that is contingent on you selling/closing on your current home and this can be harder in a market where sellers may have multiple offers from which to choose. You’re likely to be paying a higher price for the new home because of your weaker negotiating position. You probably need to be less picky about the new home.
These are the three basic options. Each has pros and cons; risks and benefits.
We have repositioning clients right now that are being successful with each and every one of these options. If YOU need to sell one place and buy another, don’t let fear or uncertainty keep you from making this happen.
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