Moving to Boise- Buying and Selling a House at the Same Time
You want to buy a house in Boise, but you have a home to sell first? What are your options to make that happen and which is best for you? Let’s find out…
Many of you have reached out to us, let us know you’ve visited, and done your research. You’re ready to make the move but are worried buying and selling a house at the same time, especially with our market not being very conducive to contingent offers. (Curious about the Boise communities? (Click here to learn more!)
The good news is that there are several options for buying and selling a house at the same time so that you can make the move to Boise, or even make the move within Boise. Locals are facing the same concerns, including how to buy without a contingent offer. So, I will be talking about the top 5 ways to do that, the pros and cons of each, and the risks and benefits of each so you can figure out what might be best for you as you plan a move in the Boise Idaho area.
The main problem we are trying to solve when buying and selling a house at the same time is that in order to make a down payment or even pay cash, you need the money and equity out of your current home to purchase the next home, and ideally you would do so at the least risk to you…and the least risk to you means more risk for the seller, and in a seller’s market, that’s not great for getting your offer accepted. So keep those things in mind as we go over options.
Number 1 for buying and selling a house at the same time. The old standby: Making an offer contingent on selling your current house.
Several years ago, this was a tried-and-true method of buying and selling a house at the same time. You found a house you liked, made an offer contingent on selling your current house, put your current house on the market, and then closed on both houses at the same time or very close to each other. This is the lowest risk and cost to you as there aren’t additional loan fees, you get to find your new home first, and you don’t have to find interim housing.
This is the highest risk offer to the seller as it may take you a week or two to get your home ready to sell, a week to get an offer, and then if that offer falls through, the sellers are back at square one, lost time on market, and usually value in the home as well.
In our current market in Boise, a contingent offer is incredibly hard to get accepted, if not impossible. Even if a seller doesn’t currently have multiple offers, they know they will receive a strong, non-contingent offer if they wait just a bit more, so there is not much incentive for them to accept a contingent offer.
There are some exceptions.
In the off chance you find a home that has been on the market for over a few weeks and the sellers are motivated, they will possibly accept a contingent offer.
Occasionally, builders on new construction will accept contingent offers, especially if the new home won’t be completed for several months.
But in that situation, expect that the builder will put parameters and timelines on when you need to have your house sold, and that may include having it sold before you can move in the new house, then where do you go? We will talk about that in a bit here.
If you absolutely MUST make a contingent offer, you must do whatever you can to eliminate risk to the seller, which puts you more at risk, and you must offer something so great that they would rather wait for your house to sell than accept a non-contingent offer.
Now, that is very rare, but I did have a seller accept a contingent offer over a non-contingent once, even in our crazy market, and here is why…
The contingent offer was high, about $30,000 higher than the non-contingent offer. The contingent offer waived the appraisal contingency, they agreed in writing that they would have their house on the market in a week and if they didn’t have an offer in 2 weeks, then they would forfeit their earnest money. So the sellers I was representing felt that earning the extra $30,000 would be worth the risk of the 2 week wait to see if the other house sold, because if it didn’t sell, then the sellers got to keep the earnest money as well.
But that risk to the buyer was pretty big…what if they didn’t sell their house in 2 weeks? They would have been out $10,000 earnest money and the cost of inspection. They were confident they would get an offer, and I actually was very familiar with the neighborhood the buyers were coming from in CA, so we were more comfortable knowing that the home the buyers were selling was in a highly desirable area.
So, if you are making a contingent offer, be prepared to put things into the contract to pay more money and put yourself at risk financially in some ways, still having a very hard time getting the offer accepted. However, you do lessen your risk of having to pay for a different financing option or finding interim housing.
And of course, the closer you are to having your contingency lifted, or to your house being sold, the more likely a seller is to accept your contingent offer. For example, I have had several clients have contingent offers accepted when they are only about a week from closing on their house they are selling.
But how does that work? They obviously would need a place to stay as the next closing won’t be for 30 more days Well, that leads us to number 2 on the list.
Number 2 for buying and selling a house at the same time: Selling your home first and asking for a rent back time period.
This is very common when buying and selling a house at the same time. Essentially, you list your home and disclose that you would like a 60 or 90 day rent back, whatever is doable and common in your area. That way, you free up your money when you close, can make an offer here non-contingent, and then not have to find interim housing. Sellers of a home in Boise see that you are making a non-contingent offer and you are off to the running. Or, as I alluded to before, you can make an offer when your current home is very close to closing, and many sellers are okay with that, and then you have a place to live while you wait for your Boise house to close.
The biggest risk to you in this situation is that you have given yourself a time frame in which to find a new house. So, you basically are betting on finding that new home within 30 days or so and closing in another 30 days. With our inventory being so very low, this can be a risk as a home you like may not come on the market in that time frame.
It’s better if you are looking for something that is more common, closer to our average price point, which is inching towards $600,000 or above (early 2022), and if you are willing to pay to live in an Airbnb, or maybe live with family in case the timing didn’t line up right. Also, there is a risk when you list your house that you cut out buyers who don’t want to give you a rent back time frame.
But overall, this scenario has worked out quite well for my clients that have chosen the selling with a rent back option.
Number 3 for buying and selling a house at the same time: A second home loan.
Remember how I mentioned that you are trying to solve the problem of getting money freed up for a down payment and minimize finding interim housing? Well, what if you either have the money for a down payment saved somewhere else, or can get if from somewhere else? That’s where the second home loan option comes in.
Now this takes careful qualifying from your lender as they will basically have to approve you to carry both debts of both homes for a while…and you probably don’t want to pay 2 mortgages, but it wouldn’t be for long. There are a few ways to do this.
Firs, use savings from elsewhere (but think twice before using it from a retirement type account that will hit you hard on taxes), but maybe you have 20% down saved in your savings. You can use that for your down payment, purchase the new home as a second home, then sell your previous home when you are ready, then refinance it all with the proceeds from the new home. This eliminates the risk of giving yourself a time frame to buy a home and of paying for interim housing, but as with all things that eliminate your risk, it will cost you more money. A second home loan mortgage rate has gone up quite a bit this year, so until you refinance, it will be a higher interest rate. You will also pay closing costs on the second home loan, and then closing costs again when you eventually refinance. It can be very costly but may be worth it if you are worried about interim housing or being rushed to find the right house or settling for a home you don’t love because you have a time limit.
Second, if you have enough equity, you can get a HELOC, or a home equity line of credit, against your first home to make up your down payment on the next. This has to be done before you list your house for sale, and it can take several weeks to fund. But then you can use the money like cash, you will have to begin repaying it as soon as you use it, and then you get the second home loan. The same risks and benefits apply as the scenario I just talked about. There is a benefit for a HELOC for another scenario. I’ll talk about in a minute.
Third, and then, similar to a second home loan, would be a product like a bridge loan, where the lender uses the equity you have in your current home as collateral against the home you are purchasing, you can make an offer non-contingent, it is only one loan, there is not a second refinancing with it, and you can purchase the second home as a primary residence, so you get a better rate. However, it is very expensive with fees, and if you don’t sell your home as planned, you are stuck paying for the debt on both homes and it is very costly.
So obviously for all of those options, you must be able to qualify for the debts of both homes, or the homes and the HELOC, and feel that you’d rather pay the fees and rates instead of taking the risks of the other options.
So what if you can’t qualify for that much short term debt, then what?
Number 4 for buying and selling a house at the same time: Take a leap of faith!
I have also had many clients choose this option. They take a leap of faith, sell their house first, then move to Boise into a short-term rental, an Airbnb, etc… and then take their time to find a house here and be able to make a non-contingent offer. So, in this scenario, you save yourself the cost of the fees for second home loans and such, BUT you pay for a rental, and rentals in Boise are in high demand and hard to come by. You will pay much more for a short-term rental. Expect about $2500 month for a 3 bed 2 bath small, short-term apartment and minimum $2800/month for a small, short-term home.
But You have to pay to live somewhere anyways, so you are either paying your mortgage or paying rent, so it’s not a total financial loss, but it is a few months of paying someone else’s mortgage instead of your own.
So this is what my family actually did when we sold our house about 10 years ago. I know, it was a buyer’s market and totally different but because of it being a buyer’s market, no one would have agreed to a rent back on the sale of our home, and we didn’t have money elsewhere for a downpayment, and we wouldn’t have qualified for debt on 2 homes. We also wanted the freedom to really decide where to settle down in the valley and put in roots. So yes, we paid for a 6 month rental and moved twice, and we found our new home about 3 months into our contract with our rental, but we found someone to take over our lease so we didn’t have to pay for rent and a mortgage. My kids were 5, 8, and 12 at the time, and we moved to a totally different area of town, and they weathered all the moves and changes just fine. We looked at it as a fun new adventure. And they really think it was.
Number 5 for buying and selling a house: Back to the HELOC
For those of you who would pay cash if you could get the equity out of your house…back to the HELOC…if you have your home paid off or significant equity, you can get a HELOC…again, before you list your home, and if you find a home that costs under the amount of your HELOC, you can make a cash offer. Yes, you will have to pay your HELOC payment as soon as you use it, but it is usually interest only, and you would only make that payment until you get your other home sold, and then you pay off your HELOC. You also need to be aware of all the fine details for your HELOC, but I have had clients choose this route, and it works well for those who want to pay cash without a contingent offer.
Of course, there are more ins and outs to all of these options, and variations within them all, and all of them take some counseling between your whole real estate team, which would include your listing agent, your lending team, and your buyer’s agent, so that you can find out which options you qualify for, and which options are best for you.
Okay so as you can tell, the less risks to you, the higher the financial costs, and overall, we want to try to find a good balance of risk to you and lessening risk to sellers. But selling a home and making a big move takes sacrifice and determination, but it’s worth it…eventually.
Education and preparation are key to a successful experience, and my team and I are here to help you gain all of that as you prepare to buy and sell a home in the Boise area. We have great lending teams we work with as well as referrals to listing agents all over the country, so let us know if you need assistance with that as well.
Deciding to move is a big decision and although we can’t eliminate all the stress, we can help you find the best solution for you to make the plan to sell your home so you can buy in the Boise area.
Want to know how to win a bidding war in Boise? Find out here!
