So, you have been thinking about buying a better house. A house that fits your needs, is in a better location, or maybe your just outgrowing your current home. But you don't have any down payment in the bank and you can't qualify to purchase your new home before you sell your old home. Don't just assume that this doesn't work. A lot of people will think, oh, well, there's no way I'll qualify for two mortgages. If you have a plan of attack, like we're going to talk about today, a lot of times you can, even if you don't think that you maybe make enough money or don't have enough saved or what have you. So don't be afraid to explore being able to qualify for two mortgages, but it's not a necessity. So let's talk about that. For those of you who do not have a down and cannot qualify for two house payments at once.
Here are the 8 Options for buying your next house even if you don't have any money down.
Let's go into each of these in detail. The first one we're going to talk about is contingent. What does that mean? There's a lot of people, all the shows, you know, they throw around the contingencies term all the time. Contingencies are the terms in which you're purchasing the home. For example, the inspection contingency, the financing contingency, the title contingency. But when you offer to purchase a home contingent, it means something different. It's confusing. I know. But what that means is that you're asking the seller of your new home to wait for you while you put your current home on the market and receive an offer. Once you receive an offer, when you're listed on the market, then you can remove that contingency and move forward with purchasing your dream home.
Now, this sounds great, right? I mean, that's perfect. There we go. Slam dunk. That's what I'm going to do. Well, there's some pros and cons to this. So think about those as well. The pros are, you're not going to have two mortgage payments because they're waiting for you to sell your current home and then you move forward. Usually closing either the same day or the next day on your new home. So timing wise, it can be just about perfect. There's really no lag in between moving because you close on your current home and then right away, close on your new home. But the cons are that the seller, in order to wait for you they probably are going to want top dollar for their home. So you're going to have very little negotiating power when you're making an offer and asking them to wait for you to sell your current home. So offering contingent.
Also a strategy that I've been using in today's really hot market is going after properties that are a little overpriced. If they spend more than a week on the market in our current market, then they're probably overpriced. And then you have the opportunity to go in and offer a contingent. Now the bad news is, is you're probably going to be paying a few extra pennies for your new home. But the good news is, is that you can transition very easily with a contingent offer. Also factoring in the fact that you need to sell your home quickly. So you definitely want to be ready, market ready, like be ready to put the sign in the front yard the next day and have the photographer take all of the pictures and put it on the market. Ideally you're like done with pictures and all of that, because then you can receive an offer as quickly as possible.
Keep in mind that the seller oftentimes can do what we call bump you. Sounds silly. I know. But what that means is that they'll accept your offer, they'll wait for you to sell your house, but if someone else comes in and they have an offer that's not contingent upon the sale of a house, they can then notify you that they have this other offer. If you can't remove your contingency, if your house isn't sold yet, they can go with the new buyers that do not have a contingency. That can be heartbreaking, especially after you've gone through all of the trouble of getting your home on the market. So, there are some pros and cons there, but contingent can be a good way. Let me grab a drink of water here and we'll move on to our next one.
A newer strategy that is working well for buying your next home is having the investor buy your next house for you. For Cash! This helps in a multiple offer situation to make sure that you win your dream home. The same day or the very next day the investors immediately sells to you and you close on your home. At times you can couple this with the investor buying your current home for an exceptionally smooth transaction. You might be wondering what's in it for the investor. Well the investor makes a fee for buying your home and tying up their cash and if they purchase your home they are able to add to their real estate portfolio.
The home trade. This has gotten really, really popular. And I think that a lot of people, when they think of a home trade, they think, well, I'm going to find my dream home. And then that owner is going to trade with me and they're going to move into my house and I'm going to move into theirs. That's not really what people are referencing when they're talking about a home trade. Ibuyers have become very popular. Ibuyers are typically large corporations. Even Zillow has got in on the game here, where they make an offer on your home sight unseen, usually for pennies on the dollar. So be aware, you are not going to get market value in most cases, from an iBuyer and then they purchase the property from you for cash and in some cases will even allow you to rent back your home for a timeframe. So they can be a really good option. However, be aware that you not only are probably going to get an original offer that is pennies on the dollar, but if you have any items that come up during inspection that need repair, they're probably going to either ask for further discount there or request that you repair them before they purchase the house. So, it can be kind of a double whammy, not only are you selling your home for cheaper, but then you're also having to give a discount for any inspection items as well. So just keep it in mind. Keep an eye on fees as well. They can be EVEN HIGHER THAN COMMISSIONS. I saw one that had a 5% fee that you paid directly to the iBuyer. It's like, well, what's the point of that? You know, it doesn't make a whole lot of sense financially. Maybe it makes sense for you timing wise, maybe you need to do this quick, fast in a hurry and it might make sense.
Selling to an investor is similar. They will purchase the home usually for cash, usually very quickly. Oftentimes they do want you out of the home and oftentimes it's for pennies on the dollar. The difference there is that I do see most investors buying it as is. So they're not asking you to do a bunch of repairs to the home or give them a credit instead of the repairs and they typically don’t charge you a fee.
This is my favorite right here. The superstar. Stretch it out. Stretch out your closing. Here’s an overview of how that would work… you put your current home on the market, sell it in the blink of an eye, right? Because you're going to use the equity maximizer as part of the buy a better house plan. You're going to know exactly what you want to do and how the whole process is going to go. And you're going to sell it and ask for a very long closing. For example, let's say you are putting it on the market in March. You asked the buyer to not close until June. This gives you time to go out and find your dream home, make an offer on your dream home and say, hey, we want to close on, let's say it's June 1st, June 1st on our dream home, and you're already have a buyer closing June 1st on your current home. Voila! Great way to go. The only thing is, is that if you don't close for an extended amount of time, this is the one con on this, it ain't over until it's over it. It ain't over until it's closed. So you're leaving yourself open to the possibility of the buyer changing their mind or something happening to the buyer, something happening to your house.
Next let’s talk about the rent back. This is kind of a modification of what we just talked about, except you are not waiting to close. You're waiting for them to take possession. So let's use our same example that we were using before you put your home on the market in March, you receive a buyer right away, the maximum equity, everything's in line. Everything looks amazing. They don't ask you to do anything on inspection. This buyer is ready, willing, and able. You close in April, but you ask to stay in the home and either rent it back or at many times, stay in the home at no cost until June. Which gives you the time, again, to go out and find your dream home AND you already have the cash in hand. It's closed. It's done. If you find a home earlier than you can let the new buyer of your current home move in earlier. But if not, you have the time and the ability to wait and close on your dream home in June. Love this strategy. It's having success for me time and time and time again right now and buyers are more than willing to do it. Oftentimes even without charging you any rent.
Last but not least, sell your current home and rent until you find your dream home. So your current home's going to sell in the blink of an eye with the equity maximizer, we know that, but finding your dream home might be a little bit more challenging, especially if you're one of the pickier buyers we talked about earlier, but that doesn't mean you can't just sell your current home and then rent for a little while. Take a short-term rental. There are temporary housing for in between homes that you can find from time to time. Try an air BNB or VRBO, even corporate rents will rent furnished homes by the month. It’s more expensive but you can use some of your equity to buy yourself some time. Or rent for six months’ rent for a year, sign a short-term lease while you go out, find your dream home and you have the flexibility to look, take your time, take a little bit longer and then make an offer when you're ready.
If you’d like more options on how to BUY A BETTER HOUSE check out the plan at www.buyabetterhouseplan or give us a call at 425-359-0181. Homematch NW, Inc.