It can seem like a daunting task to list, sell and buy a home. How do you even start the process? Many people who already own a home and are looking to upsize or downsize. Sometimes, financially it’s not possible to manage two mortgages. So how can it be done? Should you sell first and then buy? Or buy first and then sell? Or keep your home as a rental and buy another?
The answers to those questions are not black and white. Each person’s unique situation will determine the best course of action. That’s where we can help.
Traditionally selling first made getting a mortgage much easier, but it also meant you needed to find a temporary place to live. Buying first meant moving will be easier, but it also skews your debt-to-income ratio, making it harder to qualify for a new mortgage—not to mention the difficulty of juggling two monthly house payments for a period of time. Today there are mortgage options for managing buying and selling at the same time. There are also iBuyer programs where they will pay you cash for your home (below market value) and you can walk away. Every situation is different. Everyone’s risk tolerance is different. Everyone’s financial situation is different. And the market changes fast. Having someone on your side helping you navigate the best option, will relieve a lot of stress! Let’s meet to review those options.
If your finances allow, sometimes renting out your current home and then buying another could be a great way to grow your nest egg. There are major property tax considerations in Texas doing that, so some care and diligent number crunching should be done. We can help with that too!
The keys to success when selling your home and buying another, are Planning and Flexibility. A concurrent closing is possible, but should only be handled by experienced professionals. Have a Plan A, a Plan B and a Plan C. Gather all the information you need to make good decisions before you jump into anything contractual.
Common in today’s market are “seller leasebacks”, meaning that the buyer closes on your home for sale and then allows you to live there for a specified period of time at a specified daily rate. This is negotiated and agreed to with the sales contract. This can buy you a little time to close on the next home and move.
Often, moving up to a New Construction home is the easiest option because it gives you more time to sell your current home depending on the stage of construction, but new construction is very tough right now and expensive! Negotiation and proper contract preparation is key.
Another thing to consider, if staying in Texas, is the loss of your homestead cap on rising property taxes if you sell and buy. If you have owned for more than 5 years, you likely have a Cap Loss on your property tax assessment – the difference between your tax assessment and the assessed market value. With your homestead exemption, your tax assessment is capped at a 10% per year increase. In the last few years, with dramatically rising prices, assessments have gone over 10% for market value, thus a Cap Loss to the county. If you sell and buy another home, the following year your basis will likely start at the current market value, around the price you paid. This can be a huge jump in your property tax bill. Weigh that carefully before deciding to move.
Contact Us today to meet and discuss your unique situations and your options.
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