If you're thinking about selling your house this year, you might also be wondering how difficult it will be to buy a new one at the same time.

I just read an article that 40% of Americans are planning on moving in 2022. And if you're one of those Americans and you own your home, you might be really excited to take advantage of the amazing sellers market we're currently experiencing. But on the flip side of selling your home, if you have to buy a new home, you might be wondering how in the heck are you going to do that in a low inventory market?

SUBJECT TO SALE

In this video, I'm going to share with you exactly what you can expect when you are buying and selling a house at the same time in 2022, the traditional way to buy and sell at the same time would be to do a subject to sale offer. You find a great house.

You put in an offer on it, but it's subject to you selling the house you already own. And everyone agrees on a timeframe that it's going to take for you to get your house sold. Then you hurry up and get your house on the market and hopefully sold quickly. So you can remove that subject to sale contingency on your new house, the pros of a subject to sale offer.

Well, you know exactly where you're going to move once your house is sold. If everything works out as planned, there are a couple of cons to a subject to sale offer. So first of all, the house that you made an offer on, they're going to keep that on the market, looking for somebody else to buy it, because what if you can't sell your house while they still need to sell theirs?

So that's the deal. You get first dibs once your house sells. But if somebody else comes along and makes an offer, your offer might get bumped and that buyer might not have to sell a house burst in a fast moving low inventory market. There's sometimes not enough time for a subject to sale contingency to work, which might result in you being disappointed over and over and over again.

BUY A NEW HOUSE WITHOUT SELLING YOUR OLD HOUSE

Probably the easiest way to buy and sell at the same time would be to do them separately. Meaning you would go buy your new house, unrelated to selling your old house. If you're paying cash for your new house, we'll of course use your cash and then you'll get cash back when you sell your old house.

But if you're like the rest of us that get a loan for a house, well, then you might want to talk to your lender first to see what options are available to you.

Usually when someone owns their home, even if they still have a mortgage on it, there's some equity built into that. So that when you sell you roll that equity over into the new house for your down payment.

So if your down payment is tied up in your old house, you might be wondering, well, how am I going to buy a new house without selling mine first? And there's actually a couple of options for that.

Of course I'm not in charge of pre-approving anybody for home loans, because if I was, I would approve everybody for all of the things. So that's why you need to talk to a lender. Somebody who's actually in charge of the money and find out what your options are.

LOAN RECAST

They might talk to you about getting a bridge loan or maybe a loan recast would be a better option for you. That's where you buy your second home, your new home. You buy it separately from selling your other home. And maybe you have only a little down payment or maybe no down payment.

They can structure the loan to work for your scenario. And then once you sell your old house, maybe you get a chunk of money that you want to use to pay off part of the loan you got on your new house, so they can recast the loan.

Let's say you have a hundred thousand dollars in equity from your old house that you want to put on your new house. So you make a lump sum payment of a hundred thousand dollars on the new house. And then for a small fee, usually a couple hundred dollars. They'll recast your new loan, which is basically re-amortizing it because if you don't have that a hundred thousand dollars down, your principal and interest payment is going to of course be higher without that down payment.

But when you recast the loan THIS essentially re-does all of the amortizing that was set up initially when you got the loan and it takes that new a hundred thousand dollars down payment that you included as a lump sum payment into play. And now your monthly payment is less like it would have been exactly. If you had sold your house first and use that a hundred thousand dollars at the time you originally bought it.

So it's just as good as having the money at closing, except it costs you a hundred thousand dollars. It's always going to cost you a hundred thousand dollars in that scenario, but it will cost you only a couple hundred dollars for the fee for the recast.

The pro of buying a house without selling your old house is that you go right under contract and you don't have to deal with the subject to sale.

Of course, there's some cons in this situation too. First, you're going to have two mortgages. Although hopefully that's just for a very short period of time. Another con is that your buying power might be limited. So of course the bank looks at your debt to income ratio. And if you have a mortgage on your first house, well, that's going to be debt and it could limit the ceiling of what they allow you to borrow on the new house.

Now they might, they might say, oh, well, you can borrow up to $500,000 and you might find a house that's $350,000. So that ceiling doesn't necessarily matter, unless it's less than what you actually want to spend.

HOME OF CHOICE

You might decide you don't want to deal with having two mortgage payments. And you also don't want the risk of losing the house that you want to buy in a subject to sale offers situation.

In this scenario, you would put your current house on the market and your real estate agent is going to put a note in the agent remarks on the MLS that any offers should be written to include a subject to home of choice contingency. So when you get an offer, you'll negotiate the price, you'll negotiate the terms. And you'll also negotiate the amount of time that you have to find your home of choice.

So the buyers might say, okay, we're going to give you 14 days, two weeks to go find a house that is suitable for you to live in. So once everyone agrees and signs the contract, you're officially under contract and your house will go into pending status and you won't have to show the house anymore to any other prospective buyers. Yay, no more showings,

But that's when we have to start really hustling to find your new home. So then we'll go look at houses. We'll find your new home. We'll get it under contract. And you won't have to deal with subject to sale. Your offer would be subject to proceeds.

So your offer on the new house, you would essentially be telling them I'm going to buy your house. As long as the buyer on my house closes, and I get the proceeds to buy this house, that's a lot more favorable than subject to sale.

Then that's when the clock starts on the contract and everything starts moving forward. So that's when their inspection timeframe would begin. And any other contingency that's built into the contract.

The pros of selling your house home of choice, and then shopping for your house is that you get time a little bit of time to find your new home. And you don't have to have two mortgages and you don't have to deal with the subject to sale.

But of course, there's some cons in this situation too, you might get frustrated watching homes for sale, go off the market and your house hasn't sold, and you didn't even get a chance to make an offer on those. Just remember that you will get the house you're meant to have. So don't, don't get stuck on the ones that went by when you couldn't make an offer, because that's not your home.

If you can't find your home in the time that you initially negotiated. So in that example, if they gave you 14 days to find your home of choice, and then you couldn't find it, you might need to renegotiate with the buyer. When inventory is low, buyers are usually a little bit more willing to accommodate.

So hopefully your buyers will be flexible with you buying and selling a home in a low inventory market can be frustrating, but we have options that will help make the process as smooth as possible for you.

And if you're thinking about selling your house in 2022, you should totally download a copy of our Ultimate Guide to Selling Your House. It's free and jam packed with excellent information, if I do say so myself, that will be useful to you as you go through the process of getting ready to sell.


DOWNLOAD OUR ULTIMATE GUIDE TO SELLING YOUR HOUSE

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