This is a case study on buying without selling first.
There are many reasons clients come to me about buying a home. When they have a home to sell as well and they need the money from that current home things can become a little more complicated. There are many reasons you may want to explore without selling first. Here is a very recent example of how I helped my clients do just that!
STRESS POINTS AROUND BUYING WITHOUT SELLING FIRST
My clients came to mid January. They had purchased a house from me previously in 2018 that they had planned on staying in it. Covid had changed the way they lived now. They were now working from home and homeschooling, they desperately needed more space to live in!
Their major concerns were that they need the equity from their current home to buy their new home. However, they didn’t want the following to happen.
They didn’t want to end up homeless because they sold their house but then had nowhere to go.
The high prices and competitiveness of the market was stressful, would they even find a place in their budget.
They didn’t want to have to have people in and out of their home for showings, inspections, appraisals.
They wanted to make the change quick and didn’t have time to prepare their home first.
I am sure anyone can understand the anxiety around these three things. Let alone any personal decisions you may feel are stressful around the decision of buying and selling at the same time.
SOLUTIONS FOR BUYING WITHOUT SELLING FIRST
I have a lot of clients in a similar situation. A situation where they are sitting with equity in their home that they potentially could use to find a new home that suits their new needs. Many of my clients bought and have since grown their families, have had kids leave the nest or are now needing a new area with better schools. Like these guys they also just need more space due to covid changing they way they live!
I had seen this issue in the market for a while. I started to look into programs and different ways you can navigate this market without adding extra stress to your life.
For these clients we used a program called Knock.com. Knock allows you to use the equity in your current home to purchase a new home first. Once your new home is closed you then have 45 days to get your current home on the market and 6 months to get it sold. In those 6 months they help cover both mortgage payments with a bridge loan. The unique part of Knock is that if you have things like repairs etc, that need fixing in your current home, they can help you cover the cost of these things, to be paid back at closing.
We did have a small hiccup with Knock lending right at the end of our buy side closing. Someone had made a mistake and it meant we had to delay closing by a business day. We also got lucky in that we found a OpenDoor listing and they weren’t hesitant to take an offer with Knock Lending on the other side, when a local agent may be.
While I was going through this transaction one of my very dependable local lenders starting to offer Bridge Loan options. This will be so helpful for my future clients that decide to buy without selling first and could be a more affordable option then Knock.
NEGATIVES OR RISKS OF BUYING WITHOUT SELLING FIRST
Just like the real world with every “easy button” there are also some negatives that come along with it. The cost of doing business to get a home and make life easier can definitely be a negative for some.
Here is what some of the negatives or risks look like!
Your loan costs will be more. For example, Knock charge a 1.25% convenience fee as part of your closing costs.
Using a company like Knock who are out of state can weaken your offer (this is why my local lender doing bridge
loans is a great option.
Your interest rate will be higher for this type of loan setup.
You are carrying 2 mortgages until you get your house sold.
I would keep in mind with this last point that your home will likely sell very fast so carrying that second mortgage won’t last for too long.
Extra costs to you as the buyer for your loan is probably one of the biggest negatives when doing a buy first, sell later transaction. However, I would say if you really have needs that aren’t being met in your current home, a little extra cost could be worth it to find a home that suits your needs, especially with how quickly we are building equity here in the Denver and Northern Colorado areas.
SEEING IF YOU CAN BUY WITHOUT SELLING FIRST
If you would like more information on how to go about buying first or you are wondering if you could even qualify for a program, then let’s chat! I would be more than happy to help you. Book a time to chat today HERE!