How to Buy Before Selling Your Home in Austin, TX
It’s not uncommon for Home Sellers to have hundreds of thousands of dollars in equity built up after the past 18-months of steady increase of home values. Homeowners would love to take advantage of that equity and finally get the home of their dreams, but how? I’m going to tell you 4 ways that even in this market you can Buy before you Sell.
The Real Estate market in Austin is very competitive, so the thought of Selling your home before Buying seems way too stressful and near impossible to find the right home to move into, let alone being able to secure the purchase with the threat of a multiple offer situation looming at every decent house that suits your budget, location and condition. With this daunting task ahead of them, most would-be Buyers/Sellers stay on the bench and make-do with their current housing situation. I’m here to tell you about an easier way to make this transition happen so that you can make your dream house, your new house.
Seller Leaseback
First thing we can consider is a Leaseback on the sale of your current home. A Leaseback is when you sell your home and the Buyer leases it back to you after closing for an agreed amount of time. In the Austin market, a Seller could ask for up to 2-months leaseback at a reasonable rate. Sometimes a Buyer will give the Seller this Leaseback for free, oftentimes they simply ask for their PITI (Principal, Interest, Taxes, Insurance) to cover the cost of holding the home. This option allows the Seller to begin shopping for their home once under contract and use the proceeds from the sale of their home towards the purchase of their new one. There are some tricky moving parts here, but having a savvy Realtor (Josh Pruitt, Realtor) is key to making this happen smoothly.
Cash-Out Refinance
Next you may consider a Cash-Out Refinance. This is when you take out a new mortgage on your current home to tap into the equity. The bank will give you cash from your equity to use as a downpayment and closing costs on your new home. This might even get you a better interest rate if later you decide not to make a move and use the equity to make improvements on your current home. The downside to this is that it’s expensive. You’ll pay closing costs on the Refinance and shortly after pay more closing costs on the new purchase. Further, not everyone will qualify to carry two mortgages at once, even if it’s for a short time. Discuss this option with your favorite lender to get more details. I have a few to recommend if you like.
Alternative Lending Source
The third option is to consider using a company called Ribbon. Ribbon is a mortgage company that will pre approve you to allow you to shop as a CASH BUYER to purchase your dream house. The offer you place will be cash, so you can be more competitive in the market and likely secure your dream home even if you are in a multiple offer situation. Because they will be buying the home in your name, you will pay them rent until we sell your current home. Once we sell your home you will essentially refinance with Ribbon and begin making payment on your mortgage. It's a tad too complicated to explain fully here, but this is the gist of it. If you have any questions, connect with me to discuss.
401(k) Loan or Get a Gift
Lastly you can consider borrowing against your 401(k) or asking a rich uncle for a gift. Borrowing for your 401(k) is quite common and doesn’t negatively affect your debt-to-income ratio. The loans are disbursed fairly quickly, so you’ll likely only have to engage the transaction after your offer is accepted. There are some fine details when repaying the account so make sure those are fully explained before you activate the payment. A monetary gift from a relative or loved one is also quite common. Most folks get help from family with home purchases, even if they don’t telegraph that to you.
Where there’s a will, there’s a way. If you are considering Buying a home, but need to Sell first you are now armed with information on ways to make that happen. I work with clients regularly who are faced with complications in making their dreams come true. It’s my goal in life to serve and help you attain those dreams. If you would like to discuss further please feel welcome to reach out to me anytime. I’m always available for your call/text/dm whatev’s.