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Why do we need creative ways to sell and buy properties simultaneously? The reason is because we need a place to live and we have a lot of belongings! A lot of the time the money we need to purchase a new home is stuck in the home we currently own. How can we get this money out in order to purchase a new home?
1. Sell + AirBNB
Solution number 1 is to sell your home so we can get the cash to purchase another property, while putting your items in storage, a friend’s house or some other safe space while you move to a short term rental or air bnb for the meantime until we find a new home. If the place you temporarily move into is large enough you can of course put your items in there.
How does this help you as the seller?
This helps you because it gives you a lot more freedom with time. You can cater to the buyer’s timeline, which gives you more leverage in negotiations.
How does this hurt you as the seller?
You will have to pay a moving company to move your items to your temporary place of stay or storage facility and then you will have to pay a moving company again to move you into the next home you purchase.
How does this help you as the buyer?
This allows you access to the cash you have in your home as well as the freedom of time. You have a place to rest your head and you have no home sale contingency. An offer without a home sale contingency is way stronger than an offer with a home sale contingency.
How does this hurt you as the buyer?
There is no negative effect to you as a buyer in this scenario
2. Sell + Rent Back
Solution number two is to list your current home for sale, sell it and do a rent back, meaning you stay in your home until you find a new home to buy. The typical rent back is 60 days or less, unless the buyer of your home is purchasing the property in cash or under an LLC. Residential lenders typically require buyers to move into the property within 60 days of taking ownership. Commercial lenders do not care and there is no lender on a cash transaction so the buyer can do whatever they want.
How does this help you as the seller?
This helps you because when you sell your property you get access to the cash that was trapped in the property. You also do not have to move all of your belongings out of the home until you find a new place to buy. So it eliminates the liquidity issue as well as paying a moving company or a storage company twice.
How does this hurt you as a seller?
It can deter certain buyers from purchasing you property because they do not have the time to wait for you to find a new home. Real estate is a game of scenarios and we as the sellers, need a buyer whose scenario lines up with ours. In this case the buyer could not be in a rush to move into the property.
How does this help you as the buyer?
This allows us to offer on properties without a home sale contingency, which is a lot stronger than an offer with one
How does this hurt you as the buyer?
During a rent back, depending on what you negotiated you may have to pay rent to the person that bought your home. Sometimes rentbacks are free. If you do need to pay rent, that rent could eat into the money you have saved up to purchase your next home.
3. Listed Contingent Upon Sale Offer
Solution number 3 is to list your home for sale and write an offer on the property you want to purchase contingent upon the sale of yours. This means the seller of the other property is taking a gamble on you and is betting that you will be able to sell your home within a reasonable time frame. The seller of the other home typically gives 15-60 days to get an accepted offer on the home you own. The timeline depends on the seller’s urgency to sell. If they need to sell quickly they won’t give you a lot of time, if they aren’t in a rush to sell they may give you more time. This is a lot better than an unlisted contingent upon sale offer because it shows the seller of the property we are trying to purchase that we are motivated. We have our house actively up for sale, we just need to find a buyer.
How does this help you as a seller?
This allows you time to get your property under contract. Maybe it was over priced and that is why you don’t have an accepted offer on it? Or maybe it has only been on the market for 1 day so not a lot of people have seen it?
How does this hurt you as a seller?
It could put you in a position of desperation decreasing the amount of leverage you have in negotiations because you know you need to close on this property to purchase the next property.
How does this help you as a buyer?
This allows you to lock in an accepted offer on a property you like. Basically reserving it for a temporary time period. Other buyers may be deterred by the status of this property already having an “accepted offer” and they may not choose to write an offer on this property.
How does this hurt you as a buyer?
The seller can accept a different offer that doesn’t have a contingency to sell another home and if they do they need to notify us. We typically have 3 days to remove our home sale contingency, if we cannot remove our home sale contingency we have to back out of the offer and the other offer moves into the primary position. We then lose the home.
4. Unlisted Contingent Upon Sale Offer
Solution number 4 is writing an offer contingent upon the sale of your property before your property is listed for sale. This is unlikely that a seller would accept this offer, unless they are in no rush at all to sell their property. This tends to be someone who has a property rented out or someone who is living in the property they are selling or even someone who owns a property outright and does not have a monthly payment on it. If the seller doesn’t have a monthly payment on the property they are not bleeding money, therefore they are less likely to be in a rush to sell the property.
How does this help you as a seller?
It allows you time to get your property ready to go up for sale on the market
How does this hurt you as a seller?
This could potentially put you in a place of desperation, knowing you have to sell this property in order to purchase the next one. This may decrease the leverage you have when negotiating.
How does this help you as a buyer?
This allows you to lock in an accepted offer on a property you like. Basically reserving it for a temporary time period. Other buyers may be deterred by the status of this property already having an “accepted offer” and they may not choose to write an offer on this property.
How does this hurt you as a buyer?
The seller can accept a different offer that doesn’t have a contingency to sell another home and if they do they need to notify us. We typically have 3 days to remove our home sale contingency, if we cannot remove our home sale contingency we have to back out of the offer and the other offer moves into the primary position. We then lose the home.
5. Bridge Loan
A bridge loan is a short term loan to bridge the gap between buying a home and selling a home. You will need to fill out an application with a lender that does bridge loans. They will underwrite you and your income scenario determining if you are approved for the bridge loan or not. If you are approved they give you a loan, prior to you selling the home you are currently in and with this money you are able to purchase the next house you want to live in. Once you sell the home you had previously lived in, the bridge loan is paid off with the proceeds from the sale.
How does this help you as a seller?
This allows you to take your time with selling the current home you are in. It also prevents having to move multiple times. The only move would be from your current home to your new home.
How does this hurt you as a seller?
This does not hurt a seller other than the amount of interest they pay for taking out the bridge loan. The longer the bridge loan is open the more interest they pay
How does this help you as a buyer?
This allows you to purchase a home without a home sale contingency. An offer without a home sale contingency is significantly stronger than one with a home sale contingency, putting you in a better negotiating position. It also eliminates the possibility of losing the home to another buyer.
How does this hurt you as a buyer?
This does not hurt you as a buyer, this helps you.
6. Cash Out Refinance
Solution number 6 is to do a cash out refinance on the property you own. This would entail filling out a mortgage application and determining if your income can support all of the payments on all of your properties at once. If your income supports all the payments you take some of the equity in your current home out, in the form of cash, it goes into your bank account and you are able to purchase your next property with this cash.
How does this help you as a seller?
This allows you to take your time with selling the current home you are in. It also prevents having to move multiple times. The only move would be from your current home to your new home.
How does this hurt you as a seller?
This does not hurt a seller other than the amount of fees they pay a lender for doing the refinance. The fee is typically around 3% of the loan amount.
How does this help you as a buyer?
This allows you to purchase a home without a home sale contingency. An offer without a home sale contingency is significantly stronger than one with a home sale contingency, putting you in a better negotiating position. It also eliminates the possibility of losing the home to another buyer.
How does this hurt you as a buyer?
This does not hurt you as a buyer, this helps you.
7. Hard Money Loan
Solution number 7 is to do a hard money loan, allowing you to buy the property all in cash which would give you time to get the property you currently own sold. Hard Money Lenders are lenders that give you a loan, but are not a bank or an institution, hard money lenders are typically used for shorter term deals. Real estate investors use hard money lenders, when they find a deal so good they cannot pass up on it or the seller cannot wait the typical 30-45 days for a financing contingency. Hard money lenders typically have higher interest rates and fees than traditional lenders. In the right scenario hard money lenders are a great option because it buys you time to get your current property sold.
How does this help you as a seller?
This allows you to take your time with selling the current home you are in. It also prevents having to move multiple times. The only move would be from your current home to your new home.
How does this hurt you as a seller?
This does not hurt as a seller
How does this help you as a buyer?
This allows you to purchase a home without a home sale contingency. An offer without a home sale contingency is significantly stronger than one with a home sale contingency, putting you in a better negotiating position. It also eliminates the possibility of losing the home to another buyer. Since this is technically a cash transaction, you are able to close a home in as little as 14 days which is very attractive to sellers
How does this hurt you as a buyer?
This does not hurt as a buyer other than the amount of interest and fees you pay the lender. I have seen interest rates on hard money loans anywhere between 8-15% and they typically charge a point or two. A point is equal to 1% of the total loan amount.
