In the current market, do you sell first? Buy first? Or sell and buy at the same time? A lot depends on your financial situation and stamina for risk, disruption and chance.
If you sell first, as conservative traditionalists recommend, you’ll know precisely how much additional money you’ll have to spend, but it may take some time before you’re able to identify a suitable next home, so you may have to rent or move in with family in the interim. Don’t expect to be able to make your sale contingent on finding suitable housing.
If you buy first and sell second, you’ll need to have the funds not only to close the deal but also to carry two homes for an undetermined period of time. Don’t expect to be able to make your purchase contingent on the sale of your home.
If you need your sale proceeds for your next purchase, as is more often the case than not, and you’re frustrated by the current lack of inventory and fear you’ll be homeless if you sell quickly, and if you don’t want to throw good money into a temporary rental or live with your in-laws, then your best option is to buy and sell at the same time. However it’s a challenging dance to orchestrate the simultaneous closing of your current home and subsequent purchase at the same time, particularly if both are co-ops requiring board approval and especially if you’re trading up. While all situations differ and one strategy does not fit all, following are some observations and tips.
• Even though the current market continues to favor sellers, many are holding back from listing their properties because they fear they will sell before an appropriate purchasing option surfaces. This anxiety is perpetuating the declining stock of NYC residential properties. Potential sellers are nervous they won’t be able to find another home.
• Step one in the process is to evaluate the market for both the property you’ll be buying and the one you’ll be selling. Start with online searches and Sunday Open Houses for each price range. Collaborate with an experienced real estate professional who understands the intricacies and can help direct efforts and also advise how to prepare your current home for sale. Staged properties sell faster and for more money than unstaged properties, so listen carefully to staging advice.
• Have your finances in order. Check your credit and repair any delinquencies. To support any bid you make, you’ll need to submit an up to date statement of your financial condition along with a lender’s preapproval if you intend to finance. Also gather copies of recent bank and brokerage statements which you will need for your co-op board presentation.
• Once you find a suitable property, you’ll be competing with other bidders. By this time, you should have answered some hard hitting questions: Will you bid cash? Will you waive a financing contingency? Will you put a year’s worth of maintenance in escrow if the co-op board grants conditional approval? Your agent will need to convey not only your qualifications as a buyer, but will need to convince the seller’s broker that the apartment you will be selling will attract a quick deal.
• Be ready to list and market your current home as soon as you’ve identified your next. It’s best to price on target to attract multiple interest quickly. If you overestimate its value, you’ll lose valuable time.
• Hire an attorney to handle both closings and discuss your timing concerns upfront, so he or she knows when to speed up or slow down due diligence and contract reviews. In the best of all worlds, you’ll sign both contracts at the same time.
• Since the market is highly competitive for buyers, you can take advantage of your strong seller’s position to negotiate a long term close date, post closing holdover or lease back which would buy you time on the purchase side. You’ll need to determine appropriate costs, consider insurance issues and how much of the total price will be held in escrow.
• When you present your Purchase Application to the co-op board, you should be in a position to address the sale of your current apartment. At best, the board will want to see evidence that you’re in contract or at the very least that your home is listed for sale. If you don’t yet have a contract to include in the package, write a cover letter to explain that your property is on the market, has been well received and that you are in fact negotiating with a very qualified purchaser. Once you’re in contract, your agent should send this additional new information to the managing agent if your application is still under review. When you’re invited to an interview, you can address whether your buyers have been approved.
• Think about the actual calendar for walk throughs and closings for both transactions. Your apartment will need to be empty and broom clean, so if you haven’t negotiated a holdover, and won’t be able to move into the new place before you close, you may need to buy “storage in transit” from your mover to keep your possessions on the truck for several days. Strong portfolio investors may borrow against their assets at low rates, but neither bridge financing nor HEOLOCs (home equity line of credit) have been available post recession to cover short term needs for money.
Selling one home and buying another at the same time requires thorough planning and partnering with professionals who can take the lead in this complex dance.
