Want to Buy, But Need to Sell First? THERE IS HOPE!!!!!
/It’s the classic dilemma, isn’t it? You want to move to a different house. But you have no idea how to make it work. You need the money from your current house to buy the new house. But you don’t want to sell your house before you know there’s a new house out there that you love — and can win in a bidding war. So you find a house that you love, but you can’t buy it because you need the money from your current house, which you still own because you didn’t want to sell it before you found a home that you love. And so the circle goes.
This, my friends, is one of the reasons we have no inventory in Denver. Homeowners are afraid — justifiably — to part with their current homes and try their luck in what they keep hearing is an insane seller’s market. And so, they remain trapped in houses that are too big/small/old/new/far out/close in for them, despairing of ever getting out.
Does this describe you, or someone you know? Never fear, relief is here!
One beautiful aspect of a free market is that, when a need arises, people start figuring out how to meet that need. And right now, a lot of people need a way out of this conundrum. And those ways are emerging. Businesses are springing up to help homebuyers bridge that gap between old house and new house. And real estate agents like myself are creating alliances with them, to bring relief to our stranded clients.
The way these systems work generally falls into three broad categories:
They buy your old house, so you have cash to buy your new house: The first form of this was the iBuyers, who buy your house for cash and let you rent it back from them until you find a new house. Then they turn around and sell the house again, at a profit. This is how they make their money. So, obviously, you get a lot less for your house than you would get on the open market. Other companies “buy” your house for less than it would attract on the open market. But then, after you have found your new property, they let your agent sell it on the open market, and you get to keep the difference, minus a flat fee (roughly 3%). I have business affiliates who will do this. But it is my least favorite approach, for a couple of reasons. One, it is the most expensive of the options. And two, you lose ownership of your current house before you have a contract for a new house. So you risk being left homeless if you can't find a suitable replacement property.
They pay cash for your new house and sell it to you after your old house sells: I like this approach much better. You apply with them and establish that you qualify to buy a property. Then, when you find the house you love, they buy it on your behalf, for cash. Once they close, you rent it from them until your current house closes. You then use a mortgage (from them or any lender), and buy the property from them for the same price they paid, minus a flat fee. That fee varies, but from what I can tell, it ranges from 1-2% of the purchase price. I like this better, because you don’t have to commit to anything until you have a contract on your replacement property. Plus it’s less expensive. I’m exploring a company right now who, from what I can tell, has a good system in place to make this happen.
They loan you money to buy before you sell: Anybody old enough to remember bridge loans? They’re back. The concept is simple — the lender loans you money for the downpayment on the new house, and you pay it back when you receive the proceeds from your current house. Depending on your situation, that can take the form of a new “bridge” loan. Or it can be as simple as using a HELOC to pull equity from your current home. The trick, of course, is that you have to qualify to hold both homes until yours sells. I spoke with a lender yesterday who said that is true, but that they have been somewhat lenient in that regard, as long as they are confident that the old property will sell quickly. She also told me that their bridge loans come with a flat fee of $3500, plus ordinary loan fees. And that all of this is contingent on the customer using their bank for the mortgage on the new property. This is another very good option.
I have been actively researching these various approaches, and partnering with the organizations that I think offer the best opportunity to help my clients make the move they need to move, without taking unfair advantage of them (*cough* “iBuyer” *cough*) charging exorbitant fees or placing them in risky situations. Nothing is free, of course. But I think, especially in this market where multiple offers are driving prices up, some of these services are quite reasonably prices for what they offer — the opportunity to make a move in a market with very little room to move.
Interested in hearing more? Drop me a line or give me a call. I’m always happy to explore!!!
In the mean time, now that life is opening up, I am always up for cocktails or ice cream or whatever. Looking forward to seeing all of your faces again!!
Stay cool!!
