|
Strategy |
Advantages |
Disadvantages |
1 |
Buy a replacement home first. |
You know where you’ll be moving and how much you’ll be paying. |
You don’t know how much you’ll net from the sale of your home, or how long it’ll take to sell. Owning two homes is a possibility. Qualifying for a mortgage may be difficult. Requires liquid cash for down payment. |
2 |
Buy a replacement home first with a contingency for the sale of your current home. |
Same as above, but you minimize many of the risks. |
Many sellers won’t accept contingent sale offers. The best homes sell without this contingency. Poor bargaining position. |
3 |
Buy a replacement home first using a swing loan (interim financing) for the down payment. |
Same as #1. Enables you to compete against non-contingent sale buyers because you can buy without having your home sold. |
High financial risk, especially if your home takes a long time to sell and/or sells low. High carrying costs. Qualifying for financing is more difficult. Swing loans are often due in six months. |
4 |
Buy a replacement home first using a line of credit secured on your current home for the down payment. |
Same as #1 and #3. |
Less financial risk than #3 because credit lines usually don’t have a short due date. High carrying costs. Some lenders don’t permit the use of a line of credit for home purchase. |
5 |
Buy replacement home first with an employee buy-out (for transferees), or a new home where the builder will take your home in trade. |
Same as #1. |
You’ll probably have to discount the price of your home in exchange for turning the risks of sale over to someone else. |
6 |
Sell current home first. |
You know how much cash you’ll net from the sale. Eliminates financial risk. |
You may have to go to an interim rental if you can’t find a replacement home to buy in time. |
7 |
Sell current home first with a contingency to find a replacement home. |
Same as #6. You don’t have to move if you don’t find a replacement home. |
Few buyers will accept this contingency. You may have to discount your price. |
8 |
Sell current home first with a long closing and/or a rent-back option. |
Same as #6. Reduced chance of having to move to an interim rental. |
Buyers who need a quick close and possession won’t be able to accommodate you. |
