Timing can be tricky any time a client is both buying and selling a home. A resale home might fail inspection. Bad weather could cause new home construction delays. Financing may fall through, either for your client or their existing home’s buyer.
If your clients want to purchase a new home, but haven’t yet sold their old home, they may be unsure about what they’ll do in the meantime—and odds are good they’ll look to you for advice. Here are a few options to share:
Lower the selling price.
This is a great opportunity to revisit the home’s asking price—especially if you think they’ve priced it too high. Remind them that paying two mortgage payments for an indefinite period of time could equal a greater amount of money than whatever extra profit they’ll get from holding out for a higher selling price. Upon reflection, they might find it’s in their best financial interest to reprice the home to move it more quickly.
Take out a bridge loan (or swing loan).
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.
If your client wants to purchase a resale home but hasn’t yet put in an offer, you could see if the sellers will agree to a contingency offer. This would give them leeway to sell their old home before moving forward with a contract on the new home. In a seller’s market, where they’re competing with a number of other motivated buyers, that may not be feasible.
Rent the old home.
Rental properties are very hot in some markets. Your clients could be able to cover their mortgage expenses and maybe even turn a small profit if they’re in a position to rent their old home. Just caution them to investigate the tax implications, HOA rules on rental properties (if any) and—most importantly—how their plan will affect their new home’s financing.
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—and enjoy some built-in breathing room during the construction process to get their old home sold.