What Clients Can Do Between Buying a New Home & Selling the Old

Couple meeting with loan officer to sign paperwork

Timing can be tricky any time a client is both buying and selling a home. A lot can go into coordinating closing dates and scheduling a smooth move. One little thing can throw off your client’s plans! The resale home might fail inspection, or bad weather could cause new home construction delays.

If your clients are homeowners who want to purchase a new home, they may be unsure about when to put their old home on the market—and odds are good they’ll look to you for advice. Here are a few options to share: 

Take out a bridge loan (or swing loan)

For clients who want to buy before they sell, a mortgage lender should be able to tell your clients whether their old home has enough equity to qualify for a bridge loan—short-term financing that can help bridge the gap from one house to the next. Because interest rates for bridge loans are often higher than average market rates, your clients will need to weigh the cost against the benefits for their particular situation. Not all lenders offer this type of loan, and your clients will have to meet certain criteria in order to qualify.

Ask for rent-back

As a home seller trying to make moving dates line up, asking for rent-back may be key. A “rent-back,” also known as a “sale and rent back” or a “post-settlement occupancy agreement,” takes place when a homebuyer allows a seller to stay in the sold home after closing until they can move out, while charging them rent. This way, your client can avoid the stress of moving more times than necessary if they are not able to move into their next home right away. This type of agreement can also make a buyer’s offer more attractive to a seller. The buyer can earn rent income to help offset mortgage payments, new home fees and closing costs. In a seller’s market, buyers often offer rent-back at no cost.

Wait to put your old home on the market

It is important to consider and assess how quickly homes are selling in your client’s neighborhood. If you are relatively certain that your client’s home might not take long to sell, while a new home is scheduled to take eight months to build, it might be worthwhile to encourage your client to wait and market their home closer to the completion date of their new home to try to avoid wait time between homes.

Rent an apartment

If your client doesn’t want to risk the possibility of carrying two mortgages, they don’t qualify for two mortgages or it’s likely their home will sell quickly and they want to strike while the market is hot, it may make sense to encourage them to sell their home first and rent an apartment or stay with friends or relatives until they can move into a new home. This can reduce stress of rushing to find a new home, and it can make financing simpler since they’ll be buying with a set budget and cash from their sale to use on a down payment.

Buy new!

If your clients’ financing isn’t contingent on selling their home, buying new may offer some additional advantages. When building a new home from the ground up, buyers can secure a home that fits their needs, taste and budget—without haggling or worrying about competing bids. Having a home secured can take some stress out of the process.

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