Home Selling in 02466>Question Details

M K, Both Buyer and Seller in Newton, MA

Should I buy or sell first?

Asked by M K, Newton, MA Mon Oct 18, 2010

I currently own a townhouse in Newton and want to buy a single family house in Newton too.
Does it make sense to buy or sell first?

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Maksim,
Chances are, your current house payment is more than the next buyer's house payment will be. Have you seen the rates? If you can rent back your current house somewhere in between your payment and their payment (for a short time - a month or two) until you can close on your next house, you both benefit. Nothing would keep you from finding your next house now. You could narrow down your choices and define the area now, and just hold off contracting until you know you've passed all critical milestones on your existing home sale. We're doing it ALL THE TIME for folks right now. They save on moving expenses, and in many cases the buyers are happy to let you rent for a few months. It gives them time to save and pay cash for things like window coverings and landscaping - usually the first two costs once you move into a home. People are paying down-payments and paying for their closing costs these days. Any time to rebuild reserves is a blessing.

There are plenty of loan officers out there who will tell you that you can buy that home and still hold onto the townhouse. But, I can site case after case of Underwriters who tied up the process with lots of questions and concerns at the 11th hour. They don't like to blatantly deny the loans, so they just hold up the process until you get frustrated and go away. Their stall is to give you time to get your current home under contract, so they have less risk.

As a buyer with no encumbances, you have strengthened your buying position by freeing yourself of the townhome first. The most in-demand buyer is one without any contingency. In this economy, that comes with negotiating power.

I would not steer you wrong. I have no skin in the game.
Have a blessed day!
Ronda
1 vote Thank Flag Link Tue Oct 19, 2010
Well renting from the new owners does not happen as often as one might want. For once they are as eager as anyone to move in and start their new life, just as you might be when you buy your new place. Most buyers also have their own deadlines with landlord usually.
That being said selling before buying is your best bet, if you can not afford two mortgages at the same time. You do not want to feel pressure to buy just because you have to move and regret your decision later on. If you can bunk with relatives that is cool and at the same time you can save the rent money. You can also store most of your stuff and become a roommate with someone during the transition.
Prices in Newton are not going anywhere since Newton has always held its value and there are not many price fluctuations.
2 votes Thank Flag Link Wed Oct 20, 2010
Sell first, and negotiate to rent back from the new owner until you close on the house in Newton.
Avoid the expense of moving twice, and you also won't have to worry about an Underwriter making an arbitrary decision that you are too big a risk by carrying two mortgages.
Ronda Allen, Realtor, C.P.M.
Prosper, TX
1 vote Thank Flag Link Mon Oct 18, 2010
About the contingency...it depends. To ask someone to take their home off of the market and wait until someone else's home is under agreement is a lot to ask. You would have to list your home at or below the market value with a large broker, not a FSBO. It won't work for banks or short sales. My advice to to keep looking at homes , but get your other property on the market. The offer that comes in may be subject to the buyer selling as well.
1 vote Thank Flag Link Mon Oct 18, 2010
Do you own the first house free and clear? If not, do you want to make 2 house payments? Sell your current home before you buy a new one.
0 votes Thank Flag Link Sun Jan 30, 2011
Maksim:

This is as much a personal monetary question as it is a real estate question. It is way easier to buy and then sell if you can afford to carry two mortgages. If you can not then I recommend identifying some homes you like and then position your townhouse aggessively in the market place. Once you have an offer then you can strike on the home you want to purchase. The third option is to sell your town house and move into temp housing while you search for a property with money in the bank. Please reference my website if you want some professional assistance.
0 votes Thank Flag Link Sun Jan 30, 2011
Maksim

Most buyers will allow you time to shop around for a replacement home. If I was representing you the seller I would put a clause in listing stating it is "subject to the seller finding suitable replacement housing".

Generally you will have upwards of three to four weeks to find a home from the date the buyers sign an agreement with you. If you are unable to find something by then, you can choose to stay in your home and not sell, or move forward and rent.

This is much safer for you. Even though Newton townhomes tend to sell quick if priced right, I think it is too risky to buy first.
0 votes Thank Flag Link Thu Jan 27, 2011
From a financial standpoint, if you can carry both mortgages at the same time within debt limitations then it doesn't matter. Lenders can not, however, consider any rental income from your current home in your debt ratio. Not knowing your specific finances, my recommendation would be that the most practical solution is a simlutaneous sale where you close on the sale of your present home and on the purchase of your new home on the same day, which is common.
0 votes Thank Flag Link Tue Nov 9, 2010
Simple... But are you in a depreciating market or appreciating market. If you market is depreciating, Sell first. If your market is appreciating Buy first.

Good luck to you.
0 votes Thank Flag Link Mon Nov 1, 2010
Hi Maksim

I read that you are already pre-approved.
I just want to make sure that your loan coordinator has qualified you per the Fannie Mae guidelines.

Here is what you should know:
If you do decide to purchase and have not been able to sell your current home, than you townhouse would become an investment property to you and Fannie Mae says:

Both the current and the proposed mortgage payments must be used to qualify the borrower for the new transaction.

Fannie Mae will permit up to 75 percent of the rental income to be used to offset the mortgage payment in qualifying if there is documented equity of at least 30 percent in the existing property (derived from an appraisal)

If the 30 percent equity in the property cannot be documented, rental income may not be used to offset the mortgage payment.
Both the current and the proposed mortgage payments must be used to qualify the borrower for the new transaction; and
6 months of Principal Interest Taxes & Insurance (PITI) for both properties is required to be in reserves.

Just thought you might check and be sure that this won't become an issue for you
.
Best Wishes,
Barry Little
0 votes Thank Flag Link Mon Nov 1, 2010
Maksim:

If you have the ability to buy first then that is the way to go. So much less stressful. However, most people don't want to take the risk of not being able to sell and get burdened with the second property. You can find more helpful hints on my blog on my website.
0 votes Thank Flag Link Mon Oct 25, 2010
you can only buy first if you don't need to sell your home for the proceeds. If you need the funds from the sale then sell first. If not then decide on the cost to carry two homes and decide if its worth it to go that way, if not, sell first. you have decisions to make based on your goals and abilities. Everyone is different so again, it all depends on you :)

all my best

Laura Myers
0 votes Thank Flag Link Thu Oct 21, 2010
Sell first before you buy. It's the safe thing to do..
Web Reference: http://www.golftobeach.com
0 votes Thank Flag Link Wed Oct 20, 2010
I couldn't have put it better than Ronda!
Web Reference: http://www.lindacefalu.com
0 votes Thank Flag Link Tue Oct 19, 2010
Ronda - this is an interesting solution to the problem. I didn't think about this.

I see several problems with selling first and renting before finding a new place:
1. Prices may go up before you are able to find a new place (in this case you sell low and buy high)
2. If it takes a while to find a new place all the money you spend for rent are going to the landlord and you are not building equity.

The problems with buying first:
1. You need to sell in a short period of time and might become desperate to lower the price just to get the new place (You become emotionally attached to the new place)
2. Although I am pre-approved for this scenario there is always a chance that this case may complicate obtaining required mortgage.
0 votes Thank Flag Link Mon Oct 18, 2010
Sell first.

Check with a local Realtor for more details.

Hope that helps.
0 votes Thank Flag Link Mon Oct 18, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
It is very difficult to get an offer accepted if you haven't even begun the sale of your home. And in some instances you will not even be able to put in an offer if you have a home sale contingency. So, yes, you definitely want to sell first. There are many options here. If you sell your home, you have the right to counter any offer requesting a later closing date - say 60-90 days to give you time to find a home. The buyer may not accept this if they have a deadline to meet, but I see it done all the time.

Another option might be to stay with a friend or relative. If that is an option for you (in the event you sell before you find one to buy) then you can utilize a pod service. There are several of them out there. They will deliver it to your home and you can fill at your convenience. They they will pick it up and store it in a climate controlled warehouse until you call them to deliver it to your new home.

The other option has already been mentioned. A bridge loan - which I strongly advise against unless you have oodles of money in the bank and can well afford two loans indefinitely.
Web Reference: http://www.lindacefalu.com
0 votes Thank Flag Link Mon Oct 18, 2010
Christine, intuitively I also feel that selling first is the right thing to do.
However, would it be easy to sell with contingency on finding a new place?
0 votes Thank Flag Link Mon Oct 18, 2010
To buy or sell first--much will depend on your finances, credit score, etc., --do you currently have a mortgage, do you need the proceeds of the sale before purchasing, can you carry both properties financially, if needed, etc.; consider visiting with any qualified loan officer(s) first--after reviewing your overall finances, he/she can best advise and a determination can be made.
0 votes Thank Flag Link Mon Oct 18, 2010
In this market it would make sense to sell. There are many homes on the market and if you would ask that your home purchase be subject to the sale of your home is tougher these days.
0 votes Thank Flag Link Mon Oct 18, 2010
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