Every year in Toronto, there are thousands of real estate transactions; people sell their home and buy another for various reasons. Some common causes are to scale up, scale down as the family dynamics changes. People move to a different community or close to a job to reduce commute. Considering the cost and difficulty of selling your home and moving to a new one, one expects people will never move; However, underlying reasons are enough for people to take on the challenge.
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The first challenge is to sell your house promptly to the highest price you can and, at the same time, buy a house at the desired location and price. How challenging is it? Well, it depends.
How do you plan the timing to sell your home and buy one? In brief, there are four common strategies, three of which we usually suggest. Let us first focus on the two approaches we prefer and advise our clients. In the last part, we discuss the last approaches.
To keep it more comfortable to follow, in this article, we refer to your current house as "existing house" and the house you are planning to purchase as "next house."
The most convenient method. The best and easiest method is to buy your next house first, especially in the seller's market (low inventory of homes for sale). Once you have secured the property you fancy, then you can focus on selling your existing house. However, you need to have the financial means to purchase the second house cash or get a second mortgage. You'll also be paying for the regular expenses for both properties. Only a few people can afford to buy a second home in the real estate industry before selling their first one. Hence, let's look into alternative strategies used to navigate selling and buying.
The tactics that I usually recommend to my clients is to focus on selling your existing house first. Now let's look at the different scenarios possible. You sell your existing house and negotiate the most extended closing date that is feasible for the buyer, and next, you can start searching for your next house.
The closing day for sold and purchased properties are on the same day. You find the next house you love, and now, you negotiate to have the closing date on the same day as your existing house. You can pack and move to your new house on the same day, and the financial aspect of the transaction will also be taken care of on the same day. The good thing is that this happens a lot more often than many people realize. A certain level of flexibility from the buyer and seller side exists that professional real estate agents leverage by using communication and negotiation.
The closing days are NOT on the same day; your first house closes before your next house. You find the next house to purchase, but you could not coordinate the closing date. Your existing house is sold firm, and now, you are waiting to close your next house. With the ease of mind, you can use your first-house proceeds to pay for the next house if you have a mortgage that will also be transferred to your next house.
The drawback is that you'll need accommodation for the period until your next house's closing day. You may need from a few days to a few weeks. You may rent a storage space for house items and stay with family or arrange for a short-term rental. Moving is not an easy process, especially if you have to do it twice. However, let us look at the benefits; you sold your existing house, you purchased your next house all promptly and with ease of mind. Besides, you minimized financial risks.
The closing days are NOT on the same day; your next house closes before your existing house is sold firm. The good news is you have sold your first house firm and also find your next house to purchase. You do not need to worry about moving twice, financial risks; However, you need to come up with the down payment since the next house's closing date is before your existing house's closing date. For example, your next house closing date is Aug 15, and your existing house's closing date is Aug 30, which means you'll receive the money from selling your existing house 15 days after the purchase of your next house. If you need to borrow the down payment for this short period, here are some solutions you may choose from. You may consider a loan from a private lender or a bridge loan from financial institutions.
What is a bridge loan, and how does it work?
A bridge loan is a solution introduced by financial institutions to use the equity from your first home for the down payment of the next home you are purchasing. To be eligible for a bridge loan, (1) you have to be qualified for the new mortgage on your next house and (2) you need to have the signed Purchase Agreement in place on your existing home. The bridge loan is common in the real estate industry; hence, many big banks offer bridge financing to their customers.
The bridge financing can get costly. It would help if you talked to your real estate agent to reduce the closing dates' gap in both transactions. It is all about negotiation and communications; your real estate agent can guide you in this regard. Talk to your mortgage broker to get full details of the costs involved.
Here are the benefits of selling your existing home first.
Here are the benefits of purchasing your next home first.
The above Real Estate article was provided by David Khosravi, a leader in his field in Willowdale, North York, Toronto. Reach out to David via email: email@example.com or by phone: 416.990.2424