first time selling and buying at same time - how do I start?

[Anonymous]

We're thinking about 'upgrading' within the same neighborhood. This is our first home so we've never sold before; buying while renting (and with no kids is so much easier!). we live in a decent house in a desirable neighborhood, so I think it should sell pretty quickly if not overpriced. Unless a realtor tells me otherwise, we'd like to buy first so 1) we have time to make any repairs to the new house before moving and 2) we're not showing the house while living in it. I know this is insanely complicated and we'll need bridge financing, but I think our financial situation is such that we should be able to get it (again, assuming our agent agrees that our current house will sell quickly). Here are a few questions - would appreciate any advice on how to do this!

1. we need to get an idea of how much we can sell the house for before we figure out our price range for a new one - will an agent give us a ballpark figure before we sign a listing contract? (if it's not worth what we think we might change our minds, since we know what the houses we like are going for and how much we need to be able to get into one).

2. how expensive is bridge financing? I think what we do is set up our new mortgage, then basically pull all the equity out of the old house with a bridge loan to make the down payment, and pay higher fees on that loan until we sell the house and close it out? Any tips?

3. in addition to the down payment and closing costs, what kind of cash should we expect to have on hand for 1) moving from a well-furnished 3 BR house, with some packing help for fragile items, 2) staging and touch-ups to list the old house, and anything else I'm missing that adds up?

4. Are all these questions that a realtor would answer if I was still trying to decide whether to move?

Thanks!

[Anonymous]

you should really check with your agent or mortgage company to see if you really qualify for bridge financing first. I know people could get it fairly easily in the real estate heyday, but mortgage rules have changed so much in the past couple of years--I would confirm that.

Also, realize that the new non-jumbo mortgage limit is $625k, not the $729k it was in recent years. Depending on the price of your entry level home, that may inhibit first-time buyers from being able to buy your current house, unlike when you bought it.

http://www.washingtonpost.com/realestate/dc-area-housing-market-feels-the-pinch-from-lower-jumbo-mortgage-limits/2011/10/31/gIQA4RrEjM_story.html

[Anonymous]

I would interview a number of agents who know your area well to get an idea of comps, how fast homes tends to sell if reasonably priced, what they would price your place at, and what they'd want you to do to get your home ready to sell. Assuming you'd also be using the same agent to buy your new place, you'll also want to know how often a bigger "upgraded" home goes on the market, how quickly you'd have to move to bid on one, whether having a contingency to sell your place would likely be a turnoff to the seller, whether you likely could negotiate 60 days closing on the new house (would shorten the amount of time you would need a bridge loan if you can sell your place and close on that within 30 days), etc. The realtors you interview should be seeing enough contracts for homes in your area to answer these questions; if they can't, keep interviewing.

Then come up with a plan to get your place ready to sell - do all repairs, paint updates, etc., declutter; figure out what you'll need to move into storage, and find a facility and a way to do that. That way, once you put a bid on a new house, you can move clutter into storage, have your realtor do the staging and take photos, and get your place on the MRIS within a week. We did this - you just need to be sure that you've hired a realtor who is ready, willing and able to get this done and start holding open houses ASAP.

In terms of moving costs, I'd budge 1K for moving and packing (someone else may have more recent costs for this). And in terms of costs for fixing up your current place, you may be able to do much of it yourself, but you should know better once you've talked with some realtors.

[Anonymous]

DON'T do this unless you get a confirmation IN WRITING from a mortgage broker that will approve such financing for you. These days many mortgage lenders have much more strict guidelines for what they can and cannot do and I would be very hesitant to do anything like this unless your budget can handle several months (say 3-6) of paying both mortgages without dipping more than a small amount into savings. We thought the same thing. At the time we wanted to move, houses in our old neighborhood were moving quickly. We built our new home, moved and did some fixing up of the old home. And then it sat..and sat...and sat. The market in our neighborhood tumbled quickly. Fortunately, we owed relatively little on the old house and the mortgage was only about $600/month and it didn't hurt us. We finally sold, but much longer than we had originally planned for.

There is no guarantee that you will sell your house in the time frame you want, so plan around not being able to sell the house for 3-6 months. Factor that into your financial planning.

So, keep in mind that this is generic and not specific to your situation, here are some tips:

1. Start by interviewing real estate agents for your listing. Ask people you know for recommendations. Pare down your list, but interview at least 3 agents. Make each one do a comprehensive listing package for your property so that you can see what they consider to be the comparables and what they estimate your homes best listing price would be. Also make sure that all understand that you are interviewing multiple agents and will decide after you've reviewed all of the marketing plans (I find that the agents do a better job on the marketing plan when they know that they are in competition for your listing). Also make sure that they understand your situation and that it may take a little while to research the financing options before you actually list the property. Also, talk to the agent about how long it takes homes to sell in your neighborhood and how much below asking price the sales prices tend to be. If you want a fast sale, go slightly below the comparables. Also, ask if the agents have a discount if you both list and buy with the same agent. Most agents nowadays will give between 0.5-2% discount for doing both transactions. Also, ask the agent what items that (s)he feels must be done to the home to list it and what things would be nice to do. Based on those three opinions of agents who see the house, you'll get a pretty good idea of the must-dos and the maybe-dos. You'll want to do all of the must-dos and as much as possible of the maybe-dos (pocketbook allowing).

2. Based on your estimated sale price talk to a mortgage lender about how much you'd qualify for with a new mortgage and whether you are a candidate for a bridge loan. Look to get information about the bridge loan and to get a mortgage pre-approval.

3. Go back to the real estate agent and ask to see some homes to find out what the other homes in your target area are like and whether you can afford what you like.

4. While doing the home search, start working on your home. How much to have on hand? It depends on how well you've care for and maintained your home. Think like a buyer. Nowadays, the majority of buyers want a move-in ready home. So, review your property, especially targeting the following areas: kitchens, baths, flooring, appliances, storage. You do often need to spend money to make money. Pay for a cleaning service to come in and do a once over deep clean cleaning (it often costs significantly more than just regular cleaning). Declutter. Make sure that there is at least a 3 ft clearance around large pieces of furniture. If you don't have that, your furniture is too big for the space. Big furniture often makes a room feel smaller. If you don't have internal storage where you can put the extra furniture and stuff that needs to be removed and decluttered, then you should rent a storage space. Nowadays many storage places offer the first month's rent for $1 or something like that. Repair everything damaged that is visible. Replace anything that looks old, worn or dated. Do the work. You can spend less money and repair/replace something yourself than you would have to give an allowance for someone else to do it. For example, you will do better putting in $2000 in flooring than giving a $2500 flooring credit. Buyers often don't want to have to do the work before they move in. Depending on the condition of your home and how well you've maintained it, you can get away with anything from a few hundred dollars to $5000+. Remember, asking the agents about repairs? This will be based on what all needs to be done.

Since you are planning to move in the same neighborhood, plan to move all fragile and cherished items yourself. Have the movers move the bulky items. When we moved 2 miles away, we moved all of our office materials (important papers, computers, etc), family heirlooms and fragile items ourselves. We spent about 3 weeks working on painting the new house, doing custom work (I bought and installed built-in workspaces for both of us in our new office, then moved the computers and all important papers, etc) and moving fragile things ourselves. We also had friends on schedule early to come the night before the movers came to help us with last minute packing and moving important and fragile items that we did not want to leave with the movers. We made about 5-6 car trips ourselves (2 cars, 3 times) and then the caravan on the night before when our friends got to help with last minute moves and come to see the new house. It was worth it. Call moving companies (we used J&K movers and were pretty pleased with them) and tell them the number of rooms that you are moving. They'll be able to give you an estimate over the phone based on some basic questions that they'll ask you. Then you'll know how much to budget for.

[Anonymous]

TBH, I would move into a rental, sell your home (or rent it out if it doesn't sell) then consider upgrading. The truth is there is a lot of volatility in the market right now. Selling your house is probably a good move considering the value will probably only level off or drop in the next few years, however buying is much more risky. Just some food for thought.

[Anonymous]

Anonymous wrote:We're thinking about 'upgrading' within the same neighborhood. This is our first home so we've never sold before; buying while renting (and with no kids is so much easier!). we live in a decent house in a desirable neighborhood, so I think it should sell pretty quickly if not overpriced. Unless a realtor tells me otherwise, we'd like to buy first so 1) we have time to make any repairs to the new house before moving and 2) we're not showing the house while living in it. I know this is insanely complicated and we'll need bridge financing, but I think our financial situation is such that we should be able to get it (again, assuming our agent agrees that our current house will sell quickly). Here are a few questions - would appreciate any advice on how to do this!

1. we need to get an idea of how much we can sell the house for before we figure out our price range for a new one - will an agent give us a ballpark figure before we sign a listing contract? (if it's not worth what we think we might change our minds, since we know what the houses we like are going for and how much we need to be able to get into one).

2. how expensive is bridge financing? I think what we do is set up our new mortgage, then basically pull all the equity out of the old house with a bridge loan to make the down payment, and pay higher fees on that loan until we sell the house and close it out? Any tips?

3. in addition to the down payment and closing costs, what kind of cash should we expect to have on hand for 1) moving from a well-furnished 3 BR house, with some packing help for fragile items, 2) staging and touch-ups to list the old house, and anything else I'm missing that adds up?

4. Are all these questions that a realtor would answer if I was still trying to decide whether to move?

Thanks!

I was in your exact situation last March. This is what I discovered:

1) Most Realtors will tell you that in this market you should sell the house you own first and then look for one to buy. We refused to do this because we didn't want to take the chance of being homeless if we couldn't find what we wanted. Still, there is some validity to this. First, if you are looking in competitive markets like Arlington, cash is king and having a home sale contingency is a kiss of death. Granted, there are many homes on the market that aren't moving and you may convince those buyers to accept a home sale contingency, but that shifts a lot of risk to the sellers of the home you want to buy, so many will be reluctant. We took a chance in finding an overlooked house and convincing them to accept our home-sale contingency, but I think we are the exception and not the rule.

2) You should invite three real estate agents to present marketing plans for selling your home. At least one should be someone you KNOW is familiar/active in your neighborhood. Listen to the presentations, consider the comps, study the marketing plan. Ask yourself whether one of these people can also serve as your buyer agent and will they cut you a deal on your selling commission if they do. Mostly, however, you're looking for a track record of selling homes quickly at fair prices, and with a good Internet presence.

3) Bridge financing? Fuggetaboutit. Given the housing market, I don't think anyone will give you a bridge loan on the promise you will sell the house in which you currently live.

4) In addition to down payment and closing costs, you will need to spend a fair amount of money getting the home you are selling ready for market. We dropped about $7,000 on new paint, a new slate walk to improve curb appeal, and to fix a variety of other things we suspected would come up on the home inspection (which will likely cost you more than you expect). Just moving from a 4 br house in Alexandria to a 5 BR house in Arlington cost me more than $3,000. We had been in our Alex house for 8 years and had two kids. It was shocking how much CRAP we had, even after we purged several curbfuls of crap.


So, if you were following my strategy, you'd get a sense of you house's value from the presentations. Subtract roughtly 7% of the value for commissions, repairs, staging, etc. Subtract your mortgage and you get a net figure. Make sure the price is realistic b/c you can count on getting probably $25,000 or more less on an actual offer (and your buyers will likely want you to pay their closing costs and the like)

With that figure in mind you target a house in your desired neighborhood that has been on the market a while and may be open to a bid from a buyer with a home-selling contingency. Subtract about 10% from the asking price and make an offer with those two contingencies. Also ask for seller-paid closing costs to help conserve cash (the costs, including prepaids, on my $900,000 home were about $16,000).

Then you have several sleepless nights while you wait for an acceptance or a counter or whatever. Then you find a buyer for your own house. Ideally you get your own ratified contract before you're done negotiating the home inspection contingency on the new house (you said you're expecting repairs). This makes you a dangerous buyer and gives you leverage in the home inspection negotiation phase (of course, you will also have to negotiate the same issues with your own buyers).

If the house you want to buy really needs more work than can be done by the sellers or you really want to renovate, you negotiate a lease-back from the buyers of your own house or put your crap in storage for a while and live in a hotel or short-term rental.

No matter what, you're going to be hemmoraghing cash for a while. Moving is expensive! Good luck! Where are you now and where do you want to be?

Then you sell your own house as quickly and aggressively as possible.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We're thinking about 'upgrading' within the same neighborhood. This is our first home so we've never sold before; buying while renting (and with no kids is so much easier!). we live in a decent house in a desirable neighborhood, so I think it should sell pretty quickly if not overpriced. Unless a realtor tells me otherwise, we'd like to buy first so 1) we have time to make any repairs to the new house before moving and 2) we're not showing the house while living in it. I know this is insanely complicated and we'll need bridge financing, but I think our financial situation is such that we should be able to get it (again, assuming our agent agrees that our current house will sell quickly). Here are a few questions - would appreciate any advice on how to do this!

1. we need to get an idea of how much we can sell the house for before we figure out our price range for a new one - will an agent give us a ballpark figure before we sign a listing contract? (if it's not worth what we think we might change our minds, since we know what the houses we like are going for and how much we need to be able to get into one).

2. how expensive is bridge financing? I think what we do is set up our new mortgage, then basically pull all the equity out of the old house with a bridge loan to make the down payment, and pay higher fees on that loan until we sell the house and close it out? Any tips?

3. in addition to the down payment and closing costs, what kind of cash should we expect to have on hand for 1) moving from a well-furnished 3 BR house, with some packing help for fragile items, 2) staging and touch-ups to list the old house, and anything else I'm missing that adds up?

4. Are all these questions that a realtor would answer if I was still trying to decide whether to move?

Thanks!

I was in your exact situation last March. This is what I discovered:

1) Most Realtors will tell you that in this market you should sell the house you own first and then look for one to buy. We refused to do this because we didn't want to take the chance of being homeless if we couldn't find what we wanted. Still, there is some validity to this. First, if you are looking in competitive markets like Arlington, cash is king and having a home sale contingency is a kiss of death. Granted, there are many homes on the market that aren't moving and you may convince those buyers to accept a home sale contingency, but that shifts a lot of risk to the sellers of the home you want to buy, so many will be reluctant. We took a chance in finding an overlooked house and convincing them to accept our home-sale contingency, but I think we are the exception and not the rule.

2) You should invite three real estate agents to present marketing plans for selling your home. At least one should be someone you KNOW is familiar/active in your neighborhood. Listen to the presentations, consider the comps, study the marketing plan. Ask yourself whether one of these people can also serve as your buyer agent and will they cut you a deal on your selling commission if they do. Mostly, however, you're looking for a track record of selling homes quickly at fair prices, and with a good Internet presence.

3) Bridge financing? Fuggetaboutit. Given the housing market, I don't think anyone will give you a bridge loan on the promise you will sell the house in which you currently live.

4) In addition to down payment and closing costs, you will need to spend a fair amount of money getting the home you are selling ready for market. We dropped about $7,000 on new paint, a new slate walk to improve curb appeal, and to fix a variety of other things we suspected would come up on the home inspection (which will likely cost you more than you expect). Just moving from a 4 br house in Alexandria to a 5 BR house in Arlington cost me more than $3,000. We had been in our Alex house for 8 years and had two kids. It was shocking how much CRAP we had, even after we purged several curbfuls of crap.


So, if you were following my strategy, you'd get a sense of you house's value from the presentations. Subtract roughtly 7% of the value for commissions, repairs, staging, etc. Subtract your mortgage and you get a net figure. Make sure the price is realistic b/c you can count on getting probably $25,000 or more less on an actual offer (and your buyers will likely want you to pay their closing costs and the like)

With that figure in mind you target a house in your desired neighborhood that has been on the market a while and may be open to a bid from a buyer with a home-selling contingency. Subtract about 10% from the asking price and make an offer with those two contingencies. Also ask for seller-paid closing costs to help conserve cash (the costs, including prepaids, on my $900,000 home were about $16,000).

Then you have several sleepless nights while you wait for an acceptance or a counter or whatever. Then you find a buyer for your own house. Ideally you get your own ratified contract before you're done negotiating the home inspection contingency on the new house (you said you're expecting repairs). This makes you a dangerous buyer and gives you leverage in the home inspection negotiation phase (of course, you will also have to negotiate the same issues with your own buyers).

If the house you want to buy really needs more work than can be done by the sellers or you really want to renovate, you negotiate a lease-back from the buyers of your own house or put your crap in storage for a while and live in a hotel or short-term rental.

No matter what, you're going to be hemmoraghing cash for a while. Moving is expensive! Good luck! Where are you now and where do you want to be?

Then you sell your own house as quickly and aggressively as possible.

Woops. Totally meant to delete that last (redundant) sentence.

[Anonymous]

Anonymous wrote:
No matter what, you're going to be hemmoraghing cash for a while. Moving is expensive! Good luck! Where are you now and where do you want to be?

Thanks so much, everyone. We're in Chevy Chase DC in a classic 3 BR center hall colonial. We've done a lot of work - kitchen and 3 bathrooms - so with some fresh paint I'd call it move-in ready, and this neighborhood is always desirable. We are just ready for something bigger with an open floor plan and family room off the kitchen. We looked into adding on but it would be $200k, might make ours one of the most expensive on the street (we're on a somewhat busy street so less desirable than elsewhere in the neighborhood) and would still not make this house my dream home. Maybe I'm delusional, but I think our house would be super-desirable to someone who wanted to get into this neighborhood, didn't want to buy a dump and do a lot of work, and couldn't afford the $1M places on quieter streets.

Anyway, I'll definitely investigate bridge financing more carefully and talk to several agents about how fast this house could move. More feedback welcome.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
No matter what, you're going to be hemmoraghing cash for a while. Moving is expensive! Good luck! Where are you now and where do you want to be?

Thanks so much, everyone. We're in Chevy Chase DC in a classic 3 BR center hall colonial. We've done a lot of work - kitchen and 3 bathrooms - so with some fresh paint I'd call it move-in ready, and this neighborhood is always desirable. We are just ready for something bigger with an open floor plan and family room off the kitchen. We looked into adding on but it would be $200k, might make ours one of the most expensive on the street (we're on a somewhat busy street so less desirable than elsewhere in the neighborhood) and would still not make this house my dream home. Maybe I'm delusional, but I think our house would be super-desirable to someone who wanted to get into this neighborhood, didn't want to buy a dump and do a lot of work, and couldn't afford the $1M places on quieter streets.

Anyway, I'll definitely investigate bridge financing more carefully and talk to several agents about how fast this house could move. More feedback welcome.

12:04 again. Just in case, I would see if you can find a home stager to come in on consult and do a walk-through of your home and comment on areas where they think you need to do some work. Make sure that you mention that you aren't hiring them to stage, just to advise. My mother has been a realtor and property manager for over 30 years, she has an interior decorator that she regularly uses for staging and consulting. The interior decorator often has some very good ideas for home owners that do not require hiring the staging team to do. Buyers often have relatively little imagination and stagers can help you define spaces easily for buyers to recognize and see, often for relatively little money. Also, some stagers, knowing what you want, can do wonders with small budgets (I'm talking, like $2K instead of like $5K-$10K). You'll get a better idea if all you really need to do is slap a coat of paint on it. For example, I know a friend who renovated a bathroom and then put the home on the market (not immediately) but who had forgotten a couple of "shortcuts" that were taken in the renovation, and should have fixed those shortcuts for not too much money before listing...but didn't. With the amount of inventory on the rolls right now, you want to have someone check on those things before you list your home.

Also, you definitely are making the better decision. You will get more bang for your buck moving than in adding an addition. Big and costly additions that add space (rather than just renovating existing space) are only worthwhile when you cannot move.

[Anonymous]

There is no such thing as bridge financing anymore. We got a loan based on paying both mortgages (i.e. the bank agreed we could afford both assuming our old house didn't sell). To pay for the downpayment, we bored from a HOLC on the first house (get it BEFORE you put your house on the market or apply for a loan). Then we supplemented that with 401K loans.

We closed on our old house one week after closing on the new houses. We paid off the HELOC and the 401K loans. We had also broken the mortgage fro our new house into 2 (a 1st for 417 -- the highest without a jumbo -- and a 2nd, which was actually a HELOC on the second house). We paid off the second HELOC and we have only the primary loan remaining.

Yes, it's risky, but we knew we could make it work for several months if we had to. We also ended up taking less than we might otherwise have to get our first house sold. I was still a very fair price, though, so we're ok with that. We got an amazing deal on an amazing house for our new house, so we couldn't be happier. You had to understand (which we did) that it's not risk free and you have to have enough float in case you can't sell right away (our old house sold after 10 days on the market and we had a very long closing time on our new house).

It's complicated. Good luck!

[Anonymous]

Personally, I would research short-term housing options and then put the house on the market. I hate the idea of carrying two mortgages, just on the off-chance that you don't sell right away.

I spent about $7,000 painting and carpeting a 3-level townhouse and another $2,500 on miscellaneous handyman repairs. Another $100/month on storage in order to stage the place (stored books, toys, out-of-season clothes, clutter) and over $3,000 because my stuff had to be moved twice and stored for 6 weeks. Didn't need a stager - just took my realtor's advice. Sold my house in 10 days, but the seller of my new place wanted a LONG closing, so we were in short-term housing for 6 weeks. (moved in with a friend for $1500)

[Anonymous]

Anonymous wrote:There is no such thing as bridge financing anymore. We got a loan based on paying both mortgages (i.e. the bank agreed we could afford both assuming our old house didn't sell). To pay for the downpayment, we bored from a HOLC on the first house (get it BEFORE you put your house on the market or apply for a loan). Then we supplemented that with 401K loans.

We closed on our old house one week after closing on the new houses. We paid off the HELOC and the 401K loans. We had also broken the mortgage fro our new house into 2 (a 1st for 417 -- the highest without a jumbo -- and a 2nd, which was actually a HELOC on the second house). We paid off the second HELOC and we have only the primary loan remaining.

Yes, it's risky, but we knew we could make it work for several months if we had to. We also ended up taking less than we might otherwise have to get our first house sold. I was still a very fair price, though, so we're ok with that. We got an amazing deal on an amazing house for our new house, so we couldn't be happier. You had to understand (which we did) that it's not risk free and you have to have enough float in case you can't sell right away (our old house sold after 10 days on the market and we had a very long closing time on our new house).

It's complicated. Good luck!

Wow. I never would have done this, so I'm glad it worked out for you. Financing these things is always a high-wire act!

Just a note: The conforming limit now I think is $625,000. It hasn't been $417,000 since before the financial crisis. It was as high as $729,700 as early as October, and there's movement in Congress to reset it to that amount (which House Republicans oppose).

[Anonymous]

We did something similar that we had the money to finance without the bridge loan and still ended up not being able to sell the first property. (That house was also on the busiest street in a very desirable neighborhood.) Whenever I mention my choice on DCUM, people line up to tell me how completely stupid we were and how they would *never* buy before selling. Kind of interesting how few people have piled on the OP considering.

Anyway, OP, I would think long and hard about this. If you have a ton of equity (50% or more) in the old house it could work. If you can live with renting the old house out at a loss for several years, it could work. All I'm saying is plan for the worst possible disaster - if you can't hack that, don't do it.

FWIW - the house we bought was a foreclosure in a stellar neighborhood. It has great kitchen/bath, but a giant backlog of repairs as it had been a rental. We've spent two years as DIY'ers and are within shooting range of 20% equity (from less than 3%). We're also on a 2 1/2 year plan to get above water on the first place, but we're essentially broke until we sell and then it will be years more before we have savings again. Given our options at the time, I still think we made the right choice, but if you can't handle a scenario like this, I suggest you rent until you sell.

[Anonymous]

Redfin and zillow are your best bet. If you would like to save money and would like to do alot by your self http://www.virginiamls.com offers a 3.75% sale shaving off 2.25 from your costs.

[Anonymous]

Redfin and zillow are your best bet. If you would like to save money and would like to do alot by your self http://www.virginiamls.com offers a 3.75% sale shaving off 2.25 from your costs.