Hi. Is there anyone with experience on selling current house before closing on a new construction? Anything that I should consider and pay close attention to, such as agent and lender? Any experience on finding a temporary place to live before moving into the new house and moving everything into storage temporarily? We have young kids so would like to avoid hassles as much as possible. Thanks.
Selling current house before closing on new home
- Thread starter oc
- Start date
usctrojancpa
Well-known member
oc said:
Depending on the timing between closing on the sale of your home and purchase of the new home, you may be able ask your buyer for a rent back or make the sale of the home close the day before you close on the new home (this is risky if it's more than 60 days in my opinion). I've gotten a handful of clients into rentals after I sold their homes and was able to get them out of the lease early by finding a replacement tenant for their landlord. When is your new home expected to close? Is the builder insisting that you list your home for sale soon?
If you need a short term rental, longer term airbnb may be an option. You can negotiate a monthly rate. Moving things temporarily into storage is easy. Moving companies can store your items for a monthly rental fee. When you're ready to move into your next house, they bring it all back to you.
sgip
Well-known member
Quite a few lenders will allow you to close on your new home without the closing of your new home if you meet the following requirements:
1) 6-12 months PITIHOA of both homes - depends on the lender and the loan type (Conforming/Jumbo)
2) Copy of the borrowers loan commitment (Underwriters approval letter, not the DU)
3) Purchase contract addendum lifting all contingencies.
This assumes you do not need the proceeds from the sale to purchase the new home of course. If you have your own down payment without the sale of your home the departure residence property DTI should be eliminated from qualifying calculations with those three things presented to your new lender.
My .02c
1) 6-12 months PITIHOA of both homes - depends on the lender and the loan type (Conforming/Jumbo)
2) Copy of the borrowers loan commitment (Underwriters approval letter, not the DU)
3) Purchase contract addendum lifting all contingencies.
This assumes you do not need the proceeds from the sale to purchase the new home of course. If you have your own down payment without the sale of your home the departure residence property DTI should be eliminated from qualifying calculations with those three things presented to your new lender.
My .02c
USCTrojanCPA said:
I am still very early in the process right now. I just started talking to a few lenders and have not entered into a purchase contract. I am in no rush but expecting to move forward within 3-6 months. Renting back is an option but just not sure if it would turn off potential buyers.
usctrojancpa
Well-known member
oc said:
A short rent back of 1-2 months is very normal and won't turn off buyers. If you have a desirable home in a good location, you can probably get a longer rent back (3+ months). It's good that you are planning ahead of time, definitely get with your lender to determine the best course of action.
Soylent Green Is People said:
Thanks I will ask them about it. I was not aware that the departure residence property DTI can be eliminated or it could be due to COVID that they now have more restrictions. I think one lender told me they now require 18 months of PITIHOA - I was asking about jumbo loan.
I have helped a buyer sell and purchase new construction with a short 1 week rent back on his previous home. Everything is negotiable with the buyers of your home.
Also do you need to sell your home in order to have down payment for your new one? You will have to speak with sales office to purchase as contingent and they need to approve you as such.
Also do you need to sell your home in order to have down payment for your new one? You will have to speak with sales office to purchase as contingent and they need to approve you as such.
Cares said:
I do not need the proceeds from the sale for down payment so ideally I would want to close on the new one first and then sell my current place. However, if it's due to the DTI ratio since I want to borrow more and take advantage of the low rates then I will need to sell my current home first. What is a good time to list my current home? Like 3-6 months prior to closing on the new home? I want to make sure I am giving it enough time on the market and my concern is that new construction might be delayed. My current home was a new built and it was delayed for a month.
usctrojancpa
Well-known member
oc said:
Other than listing in mid-Nov until the end of the year, you can list your home just about any time of the year. I've actually had the best luck listing homes early Jan to April and mid Sept to early Nov as there were less competing listings. Remember that there are buyers that are looking for homes throughout the entire year.
If you don't need to sell your home to purchase your new home, then I would advise listing your home right after you move into your new home. Take care of any visible repair items, clean it, and professionally stage it. You want to price your home right so that it sells quickly because typically the longer the home sits on the market the lower sales price you'll get because buyers will begin to ask themselves "what's wrong with this house" if it sits on the market beyond 45-60 days and you may begin getting low ball offers.
One solution to deal with the DTI issue is to rent the home price to you closing on the new home (your tenant can move in after you move out) where you'll need to provide the lender a signed lease agreement and show the security deposit going into your bank account as long as you have 25-30% equity in the home where the lender provides you 75% of the leased amount as rental income credit against the departing home's expenses. That being said, some lenders have tightened things up and will not provide that rental income credit so you'll want to speak to lenders about this ahead of time.
Cornflakes
Active member
I tried this last year and market conditions were not right. I found it to be too much hassle to coordinate the sale (listing, showings, negotiations, timing the dates...) and closing on new construction. In the end, my house did not sell. Fortunately, the lender allowed to count 75% of the rent on departing home towards income to qualify for a new home. Finding renter was much easier and faster.
My lesson learned - live comfortably in the existing home until ready to move to the next home. Once emptied and clean, decide what you may to do with the home (sell, rent, leave it empty).
My lesson learned - live comfortably in the existing home until ready to move to the next home. Once emptied and clean, decide what you may to do with the home (sell, rent, leave it empty).
We sold our last 2 primary homes first before buying. We stayed in vacation homes while shopping for our new homes. This seems to be the less popular route judging by the previous responses, but we enjoyed it immensely.
The first time we moved into our vacant rental property for 2 months ( didn't enjoy it) and then stayed in a vacation rental in Huntington beach for another 2.5 months until we closed on the new home.
The second time we split our time between 2 different Laguna Beach vacation homes. We still miss the amazing ocean view.
It allowed us to shop for our new home with less time pressure. And it felt like we were home shopping while taking a vacation / getaway.
List your home early summer so when you close at the end of summer, you can take advantage of off-season deals @ beach vacation homes. A lot of beach vacation homes offer great deals for extended stays from late August through Thanksgiving. Some will offer big additional discounts on top of off-season rate to fill immediate vacancies. Usually start seeing amazing last min deals when it's under 14-30 days to check-in.
The first time we moved into our vacant rental property for 2 months ( didn't enjoy it) and then stayed in a vacation rental in Huntington beach for another 2.5 months until we closed on the new home.
The second time we split our time between 2 different Laguna Beach vacation homes. We still miss the amazing ocean view.
It allowed us to shop for our new home with less time pressure. And it felt like we were home shopping while taking a vacation / getaway.
List your home early summer so when you close at the end of summer, you can take advantage of off-season deals @ beach vacation homes. A lot of beach vacation homes offer great deals for extended stays from late August through Thanksgiving. Some will offer big additional discounts on top of off-season rate to fill immediate vacancies. Usually start seeing amazing last min deals when it's under 14-30 days to check-in.
irvinehomeowner
Well-known member
@Ken:
Did you have kids in school at the time? Or were these both during the summer? I'm also assuming you kept all your furniture in storage.
It's much harder to hop around when you have kids. And I really disliked having to move twice (stuff out of old home into storage... then stuff out of storage into new home).
Did you have kids in school at the time? Or were these both during the summer? I'm also assuming you kept all your furniture in storage.
It's much harder to hop around when you have kids. And I really disliked having to move twice (stuff out of old home into storage... then stuff out of storage into new home).
irvinehomeowner said:
Agree it'd be much harder if you have kids, especially if they have schools. We only have 1 kid so our situation probably isn't typical.
The first time my wife was pregnant, don't know if that falls into have kid or don't have. But it was early in the pregnancy so we didn't need to make any choice or accommodations for kid(s)
The second time my daughter was 3. But it wasn't a big deal because She enjoyed the changes and loved going to the beach everyday.
We kept most of the furniture the first time, moved them into storage. Vacation homes are fully furnished.
2nd time we sold most of our furniture. Only moved the few personal pieces we decided to keep into storage along w/ personal items we didn't immediate need.
It worked out well because we did remodeling on the new home after closing. Some of the old furniture would have been weird / imperfect fits due to the color and style change. It also made moving much easier cuz we really didnt have to move much.
Wife always loved buying new furniture so that was a big plus for her. (not me)
irvinehomeowner
Well-known member
Kenkoko said:
Well... I've always said home price ups and downs were *seasonal*.
irvinehomeowner
Well-known member
To the OP, the last time we sold a house prior to closing on the next one, we did a rentback.
It was so much easier because we didn't have to move twice. Probably harder on the buyer to make sure we don't destroy the house... but turns out even though they said it was going to be their primary residence, they ended up making it a rental, even asked us if we wanted to extend our rentback.
It was so much easier because we didn't have to move twice. Probably harder on the buyer to make sure we don't destroy the house... but turns out even though they said it was going to be their primary residence, they ended up making it a rental, even asked us if we wanted to extend our rentback.