Are you planning to start looking at Washington DC homes for sale so you can either upsize or downsize? If you are not a first-time buyer and if you have not already sold the home you currently own, you will be in the common position of needing to buy and sell properties at the same time. Depending on how the timing goes, you may experience a number of challenges during this process including those regarding financing, finding temporary living arrangements, and paying two mortgages. Fortunately, with the help of a local real estate agent and some planning, you can achieve your buying and selling goals with a minimum of stress. Here are some tips to help you out.
Understand how the market influences the process
The DC area real estate market has been hot throughout 2021
, and though it is expected to cool slightly in 2022, it will remain competitive with a lack of inventory and high prices. This means that selling a house is likely going to be easier than buying Washington DC homes for sale. Some of those who are trying to buy and sell at the same time may opt to hold off on listing their home until they have found and made a successful offer on their next property to prevent the possibility of having to find temporary housing. However, this method could easily backfire and buyers could end up with two homes they have to pay for as they search for interested buyers.
The best way to navigate the ever-changing market when it comes to buying and selling at the same time is to choose the right agent and communicate with him or her your goals for selling, your financial situation, and how you can address the challenges that occur if you buy or sell first.
Prepare for the possibility of selling first
Even though the process is known as buying and selling simultaneously, the two rarely occur at the exact same time. In almost every case, you will either buy or sell first. If you’re lucky, the time difference will only be a few days or weeks. However, the process can drag on for months, and you need to be prepared for the occasion.
When you sell your home before you find houses for sale in Washington DC you’re interested in buying, the biggest challenge you’ll face is deciding where to live until you can secure your new home. The last thing you want is to feel pressured to buy the first house that slightly interests you. To reduce this pressure and buy yourself some time, you can make plans to live with a friend or relative or stay in an extended stay hotel. If neither of these prospects is appealing, you can also offer the buyer of your home a leaseback agreement
where he or she agrees to let you rent your home back from them for a short period of time. You can also ask your agent to connect you with homeowners in the area who are willing to rent out their properties short-term, so you will have a safe place to live while you continue your home search.
Prepare for the possibility of buying first
If you buy one of the Washington DC homes for sale before you sell your own, you won’t have to worry about not having a place to live. Instead, you’ll have to worry about having two places to live — and having to pay for both of them. To address this issue, many who buy first offer the seller a leaseback agreement or turn their current home into a short or long-term rental to help cover two mortgages.
The other issue that occurs when buyers buy before they sell is coming up with the money for a down payment and closing costs when they don’t have access to the equity in the home they currently own. If you’re putting 20% down on a median-priced DC-area home
at $693,782, you’ll have to come up with almost $140,000 for a down payment along with an additional $20,000-$35,000 for closing costs. Fortunately, there are some options to help access this equity. They include:
Doing a cash-out refinance
. You can take advantage of the low mortgage interest rates by taking out a new mortgage on your existing home for what it is currently worth and more than what you owe on it. You will receive the difference in cash that you can put toward your new property.
Obtaining a bridge loan. A bridge loan
is a short-term financing option that many who buy Washington DC homes for sale before selling their current home utilize. While the interest on a bridge loan tends to be rather high, most buyers only end up paying it for a short time, as they pay the loan off in full when their home sells.
Borrowing from a retirement plan. If you have a qualified retirement plan such as a 401(k), you may have the option of borrowing from it to help make your down payment and cover closing costs. Talk with your financial advisor about what retirement plans you have in place and if it’s possible (and advisable) to go in this direction.
Regardless of which situation occurs, your most important resource in the simultaneous buying and selling situation is your real estate agent. An experienced agent has dealt with this situation multiple times with previous clients and will be able to give you valuable advice and information along the way. A professional agent should also be able to help minimize the gap between buying and selling so you can get out of your old home and into your new one as seamlessly as possible.
Ready to start the process of buying Washington DC homes for sale while attempting to sell the one you currently own? Reach out to trusted local agent Desmond McKenna
for expert assistance.