There is a long history of homeowners who overestimated the worth of their current homes and purchased from an optimistic position only to find themselves in dire financial straits. Selling first means you will be less likely to get caught short by over-extending yourself on your new home. However, by selling first you may be forced to rent while you look for a suitable new home. This can mean two moves, two lots of utility connection costs and two packing and unpacking efforts.
Alternatively you could live out of a suitcase in a hotel or with family and put your furniture in storage. This can be costly emotionally as well as financially if it takes a substantial period of time to find the perfect new home. One way around this is to request a lengthy settlement period to allow you ample time to find a new property. One of the biggest risks you will face if there is an extended gap between sale and purchase is that rising property prices will mean you get less for your money as time goes by.
If you are able to invest the equity you receive from your sale, you may be able to earn a return for the interim period, but this is generally only advantageous for owners who have built up a significant amount of equity. For those who are financially capable, buying your home first has its advantages. Primarily, it can dispense with the hassle of renting in the interim period.
This is often a major concern for the elderly, owners with young families and those with furniture requiring storage. Many buyers also find their dream home prior to selling, or even prior to contemplating selling their home. But there are several disadvantages to buying before you sell:. They deserve extra attention here. Traditionally, loans known as bridging loans were similar to personal loans. Offered at rates substantially higher than regular home loans, they were short-term products used to cover the deposit on your new home and could be secured or unsecured.
The bridging loans available today have taken on a rather different set of features. They are designed to cover the full financing of your new property until such time as you sell your existing home and extinguish all or most of the debt.
They are secured by both your existing and new properties and are offered at rates comparable with variable home loan rates. Some are intended to be short-term loans, while others are long-term.
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If you require bridging finance, ideally your current lender will oblige. If, however, you go through a new lender, they will take on your existing loan, which means paying out your existing lender and extinguishing your debt to them. The obvious danger with bridging finance is that your existing property may take longer than expected to sell and you will be forced into effectively paying mortgage repayments on two loans. The home loan landscape is littered with stories of bridging finance disasters — mostly involving extended periods of repayment due to unforeseen delays in settlement or the inability to sell the first home.
Not only is this expensive, you may find yourself selling for less than you hoped for in order to extinguish the bridging finance, leaving you with a greater net debt and less equity than anticipated. Had you not been under pressure to sell, you may have been able to hold out for a better price. However, if you choose to buy your new home before selling your old property, there are other options for bridging the financial gap between purchase and sale. Deposit bonds are an excellent alternative to bridging finance. But they are still a mystery to many borrowers.
A deposit bond is a guarantee by the company providing the bond that the buyer will pay the vendors the deposit on settlement of the property. The value of the bond is equal to the required deposit. The issuers of the bond guarantee that they will pay the vendor the deposit amount if the purchaser defaults and does not purchase the property. The provider of the bond will then pursue the defaulting buyer for this amount. When settlement on the property occurs, the deposit bond is considered executed and the buyer must pay the vendor all monies owing, including the deposit.
Deposit bonds are of particular use at auctions where you are required to pay a deposit on the spot. While the bond amount is fixed, the vendor and property details do not necessarily have to be. You can attend any number of auctions and simply complete the vendor and property details when you are the successful bidder. Not all vendors will accept a deposit bond in place of a cash deposit, so it is important to check before you go to an auction or have one drawn up for a private sale. However, as the provider of the bond guarantees to pay the amount, they are widely accepted.
It is possible to arrange deposit bonds within 24 hours, which can be done by fax or mail. Alternatively, you can purchase deposit bonds through most lenders or real estate agents at no additional charge. If you have the option, buying a second home as an investment property, or to enable you to rent out your first home and move into your second, could be an alternative worth looking at. It depends on how the numbers stack up. The decision to keep your existing property should be made in conjunction with an accountant to ensure you have the right tax advice.
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Given the historical growth in this sector, if you can keep an existing property, it can be the start of a wealth portfolio. While this can be a fantastic decision that demonstrates they are planning for the future, these homeowners need to ensure that any new purchase will not overextend their existing budget.
If the young couple has the ability to service the new property while maintaining the old property as an investment, they should get the right tax advice to take them down that path. But if they believe doing so would stretch them beyond their means, then their best option is to watch the real estate market, sell their existing place at a higher price factoring in a longer settlement period, perhaps and then purchase their new house as the market falls a little.
If an older couple is able to afford a new house while maintaining an existing property, it is something they should definitely consider. The benefit to an older couple is that they may be looking to retire in the next few years, and the income they can gain from renting the property out may make it cash-flow positive for them. They will still need to ensure that they can afford the repayments on their new mortgage if they have had to borrow the funds to purchase the new property.
Depending on her circumstances and what the market is doing, she may be better off converting her old home into a rental property as the cost of selling and buying new property is prohibitively high. At the same time, if her old property is located in a high growth area, then holding on for a few more years may yield handsome capital gains. Customers who viewed this item also viewed.
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6 Steps to Sell Your Own House
House Selling For Dummies, 3rd edition. How to Sell Your Home: How to Sell Your Home in 5 Days: Here's how restrictions apply. Review An outstanding book. Picket Fence Publishing; 3rd edition June Language: I'd like to read this book on Kindle Don't have a Kindle? Share your thoughts with other customers. Write a customer review. Read reviews that mention real estate selling your own home selling by owner selling your own home estate agents sold our own home advertising realtor buyers helpful market process save advice homes.
How to Sell Your House by Owner – Without a Realtor
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Hoping with this information we will get top dollar for our home. One person found this helpful. How to Sell Your Own Home: The Practical Homeowner's Guide to Selling by Owner provides a thorough, comprehensive and well-written guide for anyone considering the sale-by-owner option. The author truly demystifies the process and the various considerations for would-be sellers. The content is very accessible and not overwhelming, and provides a breadth of topics and information that is appropriate to novice homeowners as well as those seeking to expand their research and knowledge.
Buy first and then sell or sell first, then buy? | Your Mortgage Australia
I liked the book but was hoping it would have had a little more about pre-selling agreements and filing papers. Very helpful for what it had in it. This book is readable and nicely planned out, but it may oversimplify selling by owner. I wanted an MLS listing to help with advertising but the flat fee listers don't do it in every state.
This book makes it sound like there are many advertising avenues available to FSBO listings without being very specific , but I couldn't find any in my state, and the Internet listings aren't much good in areas where many people don't have computers. Yes, there are such places even in Plus, the FSBO sites I found were connected with flat fee listers, so prospective buyers aren't necessarily going to find them. I had to give up and list with a realtor. After taking a home-selling seminar, I referred to this book throughout the process of selling of my own home successfully, I might add!
We sold our own home in and this book helped immensely. This book gave us many pointers and example forms. It is easy to read and understand. Best decision we ever made. Having attempted to sell our home throught a realtor with disappointing results, we have decided to research the sell your own home market. This slim, easy to read book is the ideal starting place. It is brief, well organized, and to the point. For various reasons, we are discontinuing our efforts to sell our home until spring, but we plan to use the information in the book to shape our selling campaign.
I want to sell my home by myself. Supple seems to say that a real estate lawyer is a necessity, but I know people who haven't used one. Probably they are well worth it, but real estate agents don't contract with them. The point up to the marketing plan, advertising, preparation, appraising, etc.
I would have liked a matrix of necessary paperwork i. Warranty Deed, Settlement Statement or Property Tax Pro-rating , who prepares it, when it is prepared, who pays for it, and if the cost can be settled at closing.