How to Sell Your Home and Not End Up Homeless
I’m working with a family who is selling their home in the San Fernando Valley and moving to Westlake Village mainly for our excellent schools and family friendly lifestyle.
Their goal is to coordinate the sale of their current house with the purchase of their new one. Sounds easy right? Not necessarily.
In today’s market, selling your current home isn’t the challenge, it’s finding a new home and timing the close – that’s the challenge.
The Challenge Explained
You find the home of your dreams. You’re ready and excited to make an offer, but your offer is contingent on selling your home. The only way you have a shot is if your current home is minimally in escrow, or even better, all of the buyer’s contingencies have been removed. If your home either isn’t on the market at all, or it’s on the market, but not in escrow, you likely have little to no chance of getting a seller to accept.
Your dilemma: You know you can sell your house fairly quickly, but what if you can’t find a new house quickly?
There are options we can use that allow you to either sell your current house and find a new house without weakening your negotiating position, stay in your current house if you can’t find a new house, or both. Here are the most common:
Roll the Dice (Strong negotiating position, but risk of becoming homeless) – The best case scenario is you find a buyer for your home and negotiate a 45 – 60 day escrow. This is usually not that difficult to do.
In a few weeks once the buyer has removed all contingencies, you make an offer on a new home and negotiate a concurrent close. That just means both homes close on the same day or within one day of each other.
In the highly unlikely scenario the buyer of your current home backs out, you will be able to either negotiate an extension of time on your new house, or you can cancel the new house and stay in your current house until you find a new buyer. Hopefully the new house you want will still be available once you find a new buyer and you can reopen escrow.
However if you can’t find a replacement home, you’ll need to find a temporary home until you do.
Pros – You’ll be in a decent negotiating position since your buyer is highly unlikely to cancel once contingencies are removed.
Cons – If you can’t find a replacement house quickly, you better have a place to go because you won’t be able to cancel the buyer of your current house and you may end up homeless.
Home of Choice Contingency (Weak negotiating position, but no risk of being homeless) – Under normal circumstances, once you accept an offer from a buyer, you cannot cancel the buyer unless the buyer isn’t performing which is very rare. However if you have a Home of Choice contingency, the buyer and seller agree to a period of time for you (the seller) to open escrow on a new house and if you can’t find a new house during that time, you can cancel the buyer and stay in your current house.
Pros – Allows the seller to keep their current house if they’re unable to find a new house.
Cons – Having a buyer for your home with all their contingencies in place puts you in a weak negotiating position on your new house. It will be a challenge to get acceptance for your new house. You may have to offer the seller more money.
Rent Back (Strong negotiating position with less risk of becoming homeless) – This is your best option in a seller’s market. In this scenario, you let the buyers of your current house know that you may need a short term rent back – typically 30 days or less. This option gives you more flexibility and puts you in a much better negotiating position on your new house since you’ll be able to negotiate after the buyer removed all contingencies.
Pros – If you find a new house right away and get acceptance, great – you probably won’t need the rent back or maybe just a few days. If you can’t find a home right away and need more time, you’ll have the option to stay for a bit.
Cons – You still may end up homeless if you can’t find a house within the rent back time. You also need a buyer that has some flexibility on their move-in date. 30 days is typically the limit, but not always.
There are dozens of additional tweaks, options and variables for each scenario that will depend on your personal situation. It may seem hard to pull off, but I can tell you from experience that the vast majority of the time, we’re able to coordinate both sales and keep you from being homeless or even worse, moving back in with your parents.