I’m interested in knowing about people’s experiences selling their existing home and buying a more pricier one. Did you sell your existing home and take your time? Or did you buy/sell in the same timeframe somehow? I don’t think I can buy my 2nd home while paying for the first.
Just to chime in on the subject, which is a fascinating one, is the extra crazy market we have here. Non exchange or exchange situations dictate practically one to buy first cuz you can always sell, just can’t find that dream house especially if the clock is ticking for one reason or another…
In 2007, bought a SFH with a mortgage plus a bridging loan. Sold the condo about two weeks after, paid back the bridging loan. This is the preferred approach in a rising market.
The relative lack of contingent sales says a lot about your options.
At some point, when we return to a seller’s market, contingent sales will also be more common.
I think you mean “buyer’s” market…
I don’t sense that we will ever reach a true buyer’s market in the Bay Area any time soon. As soon as prices drop some, someone is going to snap up the property… they always do. The demand in the 1M and less space is just incredible!!!
No doubt! The magic price range that works for single income families (or double income with breather room for change).
Yes. “buyer’s market”.
Job and wage growth drive this market. We already have wage stagnation. A drop in employment combined with this could well shift us to a buyer’s market…for a while.
I’ve lived here for 59 years. We have shifted back and forth between them for all of that time. The long term trend has always been up and will continue I suspect. But that doesn’t mean we won’t have periods where that is not the case.
I think if you try to sell/buy at same time using contingent offer, it’s difficult in buyer’s market and impossible in seller’s market. Even in buyer’s market, selling your house is at mercy of the buyer; hard to have leverage for both sale and purchase.
If you do want to sell to upgrade, then try to sell, close, move into apartment, and buy. But you have to be dedicated so you don’t want to be caught in the sidelines too long. And you probably should already know your target neighborhood and pricing, so you are ready to buy.
On the other hand, alternative is to keep your current place and rent it out. A lot of factors here, so you have to figure out if it works for you. If you can get this to work, I suggest this paths.
Great post @jk88cal
I agree here. One possible thing you can do is, sell your place but have some rent back contingency. There is the risk that you might not get your new place until this rent back dates were up. So be ready to move if needed. I think moving is hard, but I rather spend a few thousands for movers than getting a good value when buying and selling. You might save 10s of thousands if you are willing to live in a temporary location.
When OP said he can’t afford both houses what does that mean exactly? Can’t afford the down payment of the 2nd house? Or can’t qualify for 2 loans?
These are separate issues. On down payment you can pull out equity of your old house with HELOC and/or use one of the low down payment loans. I think 3% or 5% DP loans are getting popular again.
About qualifying a 2nd loan the rental income of the old house can be factored in to boost your income. Even before you actually rent it out they can count projected income. So you may be able to afford both loans at the same time.
I can afford this second house only with the gains of the first one included after it is sold. I’ve been thinking of using HELOC from first towards the second’s down payment.
And it’s heartbreaking to think of selling your first home. Hit me like a ton of bricks when the thought first came to my mind.
Work the numbers harder. Maybe you can keep your old house.
HELOC + renting out + 3% DP loan for 2nd
There gotta be a solution there somewhere…
A couple of reasons why I want to sell. First, I want to take advantage of the $500K cap gains. Second, my house has an atypically large yard. I doubt there would be that much benefit rent-wise vs selling. Plus the added maintenance I might have to worry about.
But I’m curious, how successful have you guys been getting a 3% DP jumbo loan?
I like the idea of keeping the first house rented if you can. Have done that couple of times myself. Your got your primary house with good interest rate and got your HELOC (which you can only get it on your primary).
But one thing to watch out for is 3% DP could be unfavorable to your offer in multiple offer situation.
Regarding your capital gain, even after you move out, you still have 3 more years to sell and still take advantage of tax-free gain.
I used to think that way too, as late as last year I think. But then I thought what will I do with the money? Buy another property of course. A light bulb went on inside my head: why bother selling.
I had similar feelings. Lived in my first house for more than 30 years. It was far from a “starter home”. I was happy with it and have lifelong visions of the great improvements I would make when I retired early.
But, such feelings quickly faded after I moved into the new house. It was ten times what the old house was and it was actually reinvigorating to be on a new adventure. It was a “house honeymoon”. I’m not afraid to sink money and time into the new place whereas, I had finally come to realization that the old place was simply not worth it. Paid for or not.
I had stayed too long. The neighborhood had taken a turn for the worse and, I was one of the last hold outs from the old timers group. I figured I was insulated from the investor/renters that had swooped in and bought so many places. But you can’t fix low life neighbors.
There are still a few of the old timers there, stubbornly believing that they are better off financially staying. Most are retired. IMHO, they have no clue. Their security is only security in perception. The transient newcomers have ruined the neighborhood and it won’t get better.
I traded up primary residence in 2006. Bought first with a bridge loan then sold previous house. Was quite nervous before locking down the buyer for the house we were selling because of the bridge loan size (close to a million, wasn’t that common back then). As soon as we closed the sale we applied the proceeds to bring down the principle to jumbo conforming. Couple of years later we realized that was a mistake when we needed cash to remodel the house even though we had the cash, then a couple more years later we really regretted it when we needed cash to buy an investment property. Went through the pain with opening a HELOC plus the extra delay when we had to watch good deals slip by.
No point in regretting. If you’ve not applied the proceeds, you might have invested in stocks and lost a bundle.
Time to sell the old house