Sell then Buy? Buy then Sell?
Sell First, then Buy? Buy First, then Sell? Like the classic negotiating problem called the Prisoner’s Dilemma, there are trade-offs when deciding if you should sell your current home before BUYING, OR buy before selling. If you’re a homeowner wanting to move, you face a classic dilemma. If you make one choice—sell first, then buy—you stand to lose one way. But if you make the other choice—buy first, then sell—you stand to lose another way. Which risk should you take? Here is a short guide to help you weigh the pros and cons of your choices. The Ideal Situation Ideally, you would sell your home and move into a new home at the same time. There would be a perfect cross over—you close the sale on your old home, walk the money over to the other office, and close on your purchase. Except that 90% of the time, it doesn’t work that way. In most cases, the timing is off in one direction or the other. Your house sells before you’ve found a new home. Or you find the new home, but haven’t sold your old house yet. If you must choose between these two undesirable options (and you do), which way should you go? Let’s look at the pros and cons of choosing between buying and selling first. Your Choices (and You Do Have Choices) You are sitting in your living room one day, and you realize how small it is. You hear the road noise outside, and you think it would be nice to be somewhere quieter. You decide it’s time to move to something larger, better situated. You interview and select the perfect Realtor, let’s call her Debbie (but your Realtor is probably Bob or Tara, or something like that). You do all the things Debbie tells you to do to prepare your home for sale. You are excited when you see the sign go up in your yard. You’re ready for the offers to flow in over the next several days. You call Debbie and ask if you can go look at new houses. Trying not to be a downer Debbie, she cautions you. She starts to present you with the options: Option #1: Sell & Close before You Buy The first thing Debbie says is, Wait until your home sells and closes before making an offer on a new home. Allow about 60 days after closing your old home before you’re able to move into the new home. But, you say , if we sell first, then where will we live for two months? Where would we put all our stuff? We’d have to stay in a hotel. We’d have to store our stuff. We’d be moving twice! No way. We’re not going to do that! Option #2: Have Two Mortgages The next thing Debbie says is, Talk to your lender to see if you can afford two mortgages. Then you can buy one house before you sell the other. They might give you a “bridge loan” covering both mortgages temporarily. Well, you say, we can barely afford this loan. No way can we qualify for two mortgages, even if we wanted them. We don’t have much equity in this home. Nope. We have to sell before we can buy. What are we going to do!? Option #3: Sell at Rock-Bottom Price Ok, says Debbie. How about if you Take your time, find the right home, make an offer, then put your home on the market at a rock bottom price. That way it can close quickly enough for you to close on the purchase of the house you made an offer on. By selling at a rock bottom price, you can get the best offer possible, maybe even cash, if your price is low enough. Forget that, you say. We need the most money we can get out of this. Option #4: “Subject to Selling” Then Debbie suggests: Make an offer on your new home with a special clause written in called “subject to selling another home.” That would mean the sellers of the new home that you want would be happy to wait around while you find a buyer for your home, then close simultaneously. That sounds great! You say. But then Debbie puts you in the seller’s shoes. She asks you if you would accept an offer with a “subject to selling another home” clause written into it. She asks, what if the buyer takes six months to sell his home? Or what if the buyer gets less money than expected for his home and has to back out of buying your home? Debbie points out that if a buyer makes an offer on your house subject to the sale of his house, you are shouldering his risk. Once you accept his offer, you take your house off the market. Now you must wait for him to get an offer on his house. You wait. And wait. A couple of weeks later he gets an offer. Hallelujah. So you wait a while longer, sure that it’s just a short time now until he closes and can close on your house. But then something goes awry with his buyer’s financing and the purchase falls apart. You’ve wasted weeks and weeks, perhaps months, waiting for a sale that now must start over from scratch. That’s silly, you say. We would never accept such an offer. Debbie wisely says nothing for a moment while crickets sound in the silence. And of course, you realize that if you would not accept such an offer from someone, what are the chances that someone else would accept such an offer from you? Especially in a seller’s market. Option #5: Counter-Offer with a “Rent-Back” or “Replacement Housing” Clause Debbie then says she has the best idea yet. Get an offer on your house first. Then counter the buyer’s offer with a “replacement housing” contingency. In this case, you get an acceptable offer, then you ask Debbie to write a counteroffer that says you must find suitable housing before moving, and you’d like the possibility of renting back after closing for 15 (or 30, 45, even 60) days. The risk is that you lose a buyer who needs to get into a house quickly, but you can always decide that at the last minute, since you only do this option after getting an offer on your house. You could lose the buyer at the counteroffer, but you can reduce that risk by asking Debbie to make a note in your listing that you’d prefer to rent back. Well, you say. That would mean paying rent on our own house. I wouldn’t like that. Still, it might only be for a short time. And since I can’t get a loan, it might be my only option. Do you have any more ideas? Option #6: Take Your Chances Debbie makes her final point. Take your chances and juggle time frames. When you get an offer on your home, your buyer has about 17 days to do inspections and get his loan approved. He can pull out any time in those 17 days on the flimsiest of reasons. You can do the same, so go ahead and make offers all day long. You can always say they didn’t clean their gutters regularly and now the roof will need to be replaced, so you don’t want to buy. NOTE: This is done all the time, but is not, strictly speaking, ethical. Well, I guess we could do that. Should we do that? But can we still ask the buyer for that replacement housing clause? Final Word So where does that leave you? Sell first, then buy…or buy first, then sell? Here is what you should do: First or second, speak to your lender. Understand your financial situation and what kind of loan options there are for you. Can you have two mortgages? What can you afford in a new home? Get the facts. Second or first, speak to us, your Realtors. Understand the market. Are homes selling quickly or slowly in your neighborhood? Would your home in its location and condition sell quickly or slowly at the price you want? What price could you get, and is it worth it to move at that price? What would your ideal replacement home cost? Can you get a new home you like for the price you can afford? Will you get enough out of your sale to make your new home affordable? Third, make a contingency plan for living in temporary housing. Price out storage and moving trucks. Look around for friends with big basements where you can stay or store goods. Price out extended stay hotels. You probably won’t need this, but it’s good to have the facts. Fourth, combine options: · Go out and look at houses in your new price range. Do the leg work now, because once you put your house on the market, you may have to make decisions quickly. · Put your house on the market and plan to ask the buyer of your house for a rent-back. · After you get an offer and the buyer accepts your rent-back clause, start making offers. If your buyer backs out during his inspection period, be sure you also back out of your purchase. Otherwise, you might be locked in to buying the new home, but without a buyer for your old home. Contact us for the facts to help in making your decision.
Open Houses, Do or Don't?
There are definite reasons to hold Open Houses, and reasons not to. Read more to evaluate your best course of action! When you hire a real estate agent to sell your home, one of the first things they'll suggest is hosting an open house so that potential buyers can casually check out your property on a weekend afternoon. But while open houses are promoted by agents as a great way of finding a buyer, a US study by the National Association of Realtors (NAR) found that the success rate of open houses is a mere 2% to 4%. Similar studies in other countries have mirrored these results. That means out of 100 open houses, only 2 to 4 homes are purchased by buyers who came through that home’s open house. So, with that sobering data, why do real estate agents still promote open houses as a listing and selling tool? Let’s look at a few arguments for and against open houses. Reasons NOT to hold an Open House There are many people—agents and consumers—who argue against open houses. Some sellers just don't like the idea of random people and neighborhood "lookie-loos" traipsing through their house. Some are concerned about theft. Some agents are concerned about their own safety when holding an open house, especially in out-of-the-way locations. Some agents consider it a waste of their time, based on the low potential results...they'd rather be managing other aspects of their business (or golfing) during that time. One of the main arguments used by sellers and the general public against open houses is that agents only use them to find buyers that they’ll take away to other houses. But this is not necessarily a bad thing. Real estate is a community product and selling it is a community event. Buyers may meet an agent at your open house, then go buy another house…but another buyer somewhere is meeting another agent at another open house, and that agent is bringing the buyer to your house. Open houses bring buyers out. By having an open house, you’re contributing to the overall health of the industry. As many as 45% of buyers use open houses to research the market. Many go to open houses, then discover they like the neighborhood and look for other homes in that area with their agent. Your house might be one of their “test” houses, or it may be one that they decide to buy because of another person’s open house in your neighborhood. It's a network. Valid reason you SHOULD hold an Open House 1. Get "Shoppers" out of the way A lot of buyers will want to see your house as soon as it's listed. You can become overwhelmed by the repeated appointment requests. Showing your home is disruptive and quickly becomes annoying. Having to keep the place clean and be ready to vacate on a moment’s notice may seem fine for the first few days, but you’ll lose patience with the process if it drags on. In today’s market, homes are still selling quickly, but you may find yourself showing it for a few weeks before the best offer is submitted. By holding an open house, your agent can get a ton of those early "shoppers" through your house at one time, rather than bothering you with appointment after appointment. Most of those buyers will eliminate your house as an option during the open house. Some will want to view it again. And a very small percentage may want to make an offer. But the biggest reason to hold the initial open house is to get the lookie-loos and initial round of buyers out of the way. They're just shopping, not buying. You may want to ask your agent to hold the house open on both Saturday and Sunday of that first weekend. By doing a "new listing" open house, you won’t eliminate all appointments (some people can't come during the open house time), but a large percentage will come during the open, and that means those people won't be bothering you during the week to set appointments. 2. Create an "Auction Effect" There is a principle in psychology called scarcity – it's the desire that's in all of us to want to get something valuable before someone else does. For instance, when more than one person wants your house, it generates a bidding war. Bidding wars often result in the home selling for more than the asking price – and the buyers still feel great about it because they won. It’s a win-win for the seller and successful buyer. Situations like this are called an auction effect. An open house on a new listing can add to the auction effect by focusing a lot of buyers on the house at one time, creating a sense of competition. It happens all the time! 3. Draw in larger groups of buyers While a single open house might not get a lot of foot traffic, a community or neighborhood-wide open hosue can draw in more buyers for all the open houses, yours included. In this situation, agents agree to hold open houses on listings that are near one another. 4. Get useful feedback A new listing open house is a grea time to get feedback on the property. Information is valuable. Your agent should be asking things like "How does this hosue compare to others you've been seeing?" "What do you like about the home?" " What would prevent you from maing an offer?" Your agent can use different techniques to gather feedback, such as surveys, direct conversation, feedback forms, etc. It's important to take feedback to heart. If you keep hearing the same input over and over again, then those things are real and may be preventing your home from selling quickly or for top dollar. It doesn't hurt to listne and then have an open-minded discussion with your agent about how to remedy those issues. Contrary to popular opinion, most agents are not going to tell you to drop your price or landscape your front yard just so they can sell your home faster. They'll only tell you those things if they think your price or landscaping, etc. are interfering with the sale of your home. 5. Showcase a unique property In some cases, a house is so unique that it requires an open house to sell it. For example, art professor Maria Acevedo insisted on open houses to showcase her California home, because "It had a unique sensibility, with spacious rooms and a large amount of built-in furniture that was crafted by hand. It felt solid," according to the listing agent. Those things didn't show up in the listing's online photos. The house literally felt different once people went inside. Sometimes you must get people into a house in order for them to fall in love with it. Final Word When you hire us to represent you in the sale of your home, we'll discuss the pros and cons of having open houses as a part of your marketing plan. We'll let you know what's happening in the market - whether open houses are effective right now or not - and whether your house would benefit from open houses, given its style, price, and location. Call to set a listing appointment well before your desired move date(4-6 months is ideal, but we're adept at working with tighter timeframes too). That gives us plenty of time to plan your home's marketing and moving details
How to Buy Land
In 2023, the average cost to BUILD a home in the US is around US$284,723. In Canada, the cost is around CA$385,321. The average cost to BUY an existing home in the US is around US$400,000. In Canada, the cost is CA$662,000. It seems like building would be cheaper, right? If we are only talking about erecting a structure, then it is cheaper. However, the building costs cited don't include the cost of buying the land or developing the land. Let's dig into the details: How to buy land and build a house in 4 steps. 1. Looking for Land As mentioned above, the land development costs are separate from average building costs. That's because there's no way to estimate an average. Some land is miles from the nearest utilities. Other land is in a subdivision with utilities already stubbed in a few meters from the property. Some land is rocky and hard to dig. Other land is flat and easy. So, as you're looking for land, or considering the buildability of the land, particularly the following: UTILITIES. Research the location of nearby utilities, the availability of tapping into those utilities, and the zoning for what you want to build. You may need to use propane, dig a well, install solar, or put in a septic tank. LAND QUALITY: Can the land be developed easily, or will it require literally moving mountains? Are there nearby waterways to protect? Do you have access to bring in development equipment? Are there future plans for nearby land that could affect your property value or enjoyment? To keep costs down, look for lots in existing or planned developments, where a developer has already invested in stubbing in utilities, has paved some roads, and where the land is attached to sewer or large enough and appropriate for a septic system, if necessary. 2. Financing Your Land Purchase Financing a land purchase isn’t as easy as applying for a traditional mortgage. Most people buy land with cash. If you don't have cash to buy the land, you might be able to work out a deal with the current land owner to buy it from them on a "land contract" (sometimes called owner-financing). You may be able to pay the loan off once construction is complete and you refinance. Or you may want to continue with the land contract if the terms are highly favorable. If you're buying a lot inside a planned development, chances are the developer will help finance the purchase of the land along with building the new house for you. This is called "improved land," and can be more cost-effective. 3. Financing Construction You’ll also need to fund the construction of your home. Unless you’re paying in cash or have some other funding, you’ll need some form of construction loan. Construction loans come in two types: stand-alone loans and construction-to-permanent loans. Stand-alone loans only fund the building of the house and usually must be paid off once construction is done (ideal if you're building on spec to sell right away). You may be able to get a new mortgage on your finished home to pay off the construction loan. Construction-to-permanent loans can be simpler. It’s one loan with one lender that fund the construction, then it converts to a monthly mortgage once the house is built. You'll want to discuss these options with your lender. Let me know if you need a referral to a local lender. 4. Preparing to Build Once you’ve purchased the land, you’ll need to prepare to build. This means hiring an architect and contractor. They will help you design according to the property limitations and your personal design preferences. Then they'll help you apply for the correct building permits. Expect to pay the architect between 5% and 20% of the cost of the build. If the home is in a development, the builder or developer may be able to provide architectural plans at low or no cost. If you hire an architect and contractor who are familiar with the area, they will know the local building codes and requirements for your permits.
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