The current real estate market continues to present an amazing opportunity for our clients to TRADE UP! Whether that means buying a bigger home or moving into a more desirable area, now is the time to make that move!
The question I get very often, though, is, “should I sell first or buy first?”
Here are two ways to accomplish your dreams of trading up.
1. Sell first and then buy!
This is the most common method of trading up, especially if you are planning (or need) to use some of the proceeds from the sale of your home for the purchase of your new home. The strategy with this method is fairly straightforward. You first put your home on the market for sale, and then find a new home to purchase while your home is in escrow, or afterwards.
“What if I sell my home and then can’t find anything to buy?” That is a legitimate concern, especially given the low inventory we are currently experiencing in the Los Angeles real estate market. There are three different ways we are able to accomplish the trade-up for our clients when they need (or want) to sell first and then buy.
First, you can use a lease-back. The way this works is that you “lease” your home back from the buyer for a specified period of time after the close of escrow. Typical time frames for the lease back range from a few weeks to 60 days, and sometimes longer. Including the escrow period (typically 30 days), that gives you some extra time to find a new home and close escrow on that purchase.
Second, you can use a home purchase contingency. The way this works is that a contingency is included in the sale of your home, such that you do not have to sell your home if you are unable to find a suitable new home. Although technically possible, this method of accomplishing the trade-up is more challenging and limits the number of interested buyers because some buyers may object to this contingency. We have successfully used this method in circumstances where the seller has already located a suitable new home but may not be able to purchase it until the seller’s current home is in escrow.
Third, you can sell your home and lease a replacement until you find a new home. This is probably the least desirable for most of our clients (because moving twice is not ideal!), but it is certainly an option.
2. Buy first and then sell!
Although this way of trading up is more convenient, you either have to be able to afford to do so, or you can get creative. Here are your options.
First, if you have the down payment available and you can qualify for financing without selling your existing home (or if you are paying all cash), you simply find a new home, buy it, and then worry about selling (or leasing out) your existing home afterwards. Obviously, this is the most convenient, hassle-free way of trading up. If you can do it, go for it!
If you don’t have the down payment available or otherwise cannot qualify for financing your new home until your current home is sold or in escrow, you do have some creative options. Among these would be a lease with option to purchase, seller financing, alternative financing (private financing), and several others.
And there you have it! It’s a great time to Trade Up in Los Angeles real estate! Take advantage by using one of these strategies. If you have any questions or need further information, be sure to call us at 310-432-5755 or e-mail us!