When your current home is not working for you: Do you buy a different home first, then sell? Or do you sell your current home, then buy the next home? It's an age old question, that has no easy answer. In Episode 19 of the Getting Your Edge: How to right-size your home and life podcast, Judy and Dennis will help you decode this dilemma so you can find the right answer for your situation. Each scenario has it 's pros and cons. And market conditions can influence your decision. After listening to this podcast, you will have a better understanding of how to approach this question, who you should talk to, and how the process works.
When your current home is not working for you: Do you buy a different home first, then sell? Or do you sell your current home, then buy the next home? It's an age old question, that has no easy answer. In Episode 19 of the Getting Your Edge: How to right-size your home and life podcast, Judy and Dennis will help you decode this dilemma so you can find the right answer for your situation. Each scenario has it 's pros and cons. And market conditions can influence your decision. After listening to this podcast, you will have a better understanding of how to approach this question, who you should talk to, and how the process works.
Episode 19: Buy or Sell First? Decoding the Dilemma of Homeownership
- Dennis Day
Are you whole good neighbors and welcome to. Episode 19, Getting Your Edge How to Write Size Your Home and Light Podcast, brought to you by the Bar, your little edge group team and exp reality.
are so excited to be back. We have a couple of things to follow up on from our previous episode.
I don't know, Judy, if you've seen it, I read the Seattle Times and I'm going to share this newspaper.
Uh oh, it's backwards. Well, people on radio can't see it. Basically, it says the landscape has changed for sellers planning to remodel.
- Judy Gratton
So last week we talked about buy versus sell, right?
- Dennis Day
Here's what they're saying. “It didn't matter much if you spent months on unnecessary renovations when houses were shooting up in value several years ago. Sellers were getting offers well above their listed price. There was a delay in their renovations. you get your renovations started, and it takes a few months while their home of value was increasing during that time. But that all worked in the seller's favor, but the market cooled.”
- Dennis Day
So, in the article they're giving an example of this real estate agent for Windermere agent, Max Rambakh, says “one seller in the Bridal Trails neighborhood they sank $400,000 into remodeling, watched home sales and prices fade during the eight months was ongoing, and ultimately to a loss on the renovation investment.”
- Judy Gratton
That's a huge reason why before you even start a remodel, you should talk to your realtor. I say realtor versus real estate agent.
They are two different things. People who are realtors pay for the privilege of being a realtor with the National Association of Realtors.
And they also agree to abide by a code of ethics. So real estate agents are required to abide by the law, but they are not tied to any code of ethics.
They may be very ethical and they may not. But a realtor guarantee or warrant. If they're not abiding by that code of ethics, you can file a complaint with the Board of Realtors in addition to the license.
Washington State or any state licensing board. So I highly recommend realtors. We are realtors. And I highly recommend that you have one that is your, just like you have a dentist and a doctor, you have a realtor and they'll be there to answer those questions for you.
Is it a good idea to remodel? Is it a good idea, you know, what to do with the equity in my home?
They can help you with that. And it doesn't cost you anything. If not, till you go to sell.
- Dennis Day
Well, speaking of selling, let's talk about the chicken and egg scenario. And this happens to a lot of people.
They're in a home. It's not quite right. And are they going to sell that home first and then buy their next home?
Or are they going to buy the home, their next home first? And then sell. Larry Corinne at home. So why don't you talk about some life changes that where people are thinking about this home is not working right?
- Judy Gratton
There are so many and really that's why people buy. That's why they move. If you're single and you buy a condo or even rent a condo on Capitol Hill because it's such a hip cool place to live.
And then you get a partner or get married and you suddenly it's too small or you add to that you have children or pets and they don't fit.
And so now you have and the whole environment doesn't work for you anymore. So now maybe because you have children you want to move to a place where they have a yard and the schools are good.
And so that's what happened to to me we lived on Capitol Hill..comdo.com.com. We had our daughter on Capitol Hill and it was a wonderful place to live at the time, but eventually it didn't work for us with a two-year-old and we ended up moving.
Our first move was to a home in Kirkland and had a huge backyard and that's, we wanted the schools and we wanted the yard and that was why we made that move.
So that's, you know, the environment changes. You get divorced. Unfortunately, someone passes away. You're getting older and the home is too small.
You have children and the home doesn't work for you anymore.
The neighborhood doesn't work for you anymore. It just, you're relocated. There are many, many reasons that people move.
- Dennis Day
Yeah, the possibilities are endless. what we concentrate on downsizing because that's kind of where we are specializing, but
It doesn't have to be a downsizer who's looking at the scenario. It could be the folks who are moving up or even sideways, maybe moving from that suburban place to a downtown, you know, exciting condo or the beach or resort area, etc.
So what's kind of first about what you do? You've got a house that's not working for you. What do you want to what do you do?
- Judy Gratton
Well, as I just mentioned, if you have a realtor that you're working with, I would be contacting them to they know the questions that to help you make an informed decision about what your next step is.
They can help you by asking you questions that can help you make a decision. Maybe it isn't the home that isn't working for you so much as maybe it needs to be updated or maybe not.
You maybe it is the home and you need to move. These are questions that they can help ask you.
If you added a bedroom with that help, what is your, they can tell you, you know, what is your equity position in that home?
And your equity is the money that you would walk away with if that home was sold. And you can use that money sometimes and not move to remodel, to go on vacation, to do any number of things.
And so those are all things that a realtor can help you do. Our other realtor here, Joan, walked into the room.
So anyway, that those are things that a realtor can help you do. But once you have that realtor, it's like the first question is why is that home not working for you anymore?
You need to figure that one out. And then once you figure that one out, the next thing would be, okay, if this home isn't working for you anymore,
What do you need and want? And you want to make that question. You want to make sure that the next move you can stay there as long as possible, that it meets your requirements.
So what do you need? What do you want? different things. Because the next question is, what can you afford or your budget?
And that's where the lender comes in.
- Dennis Day
So you mentioned a term equity position. Let's examine that a little bit.
- Judy Gratton
What do you mean by that? So when you buy a home and you pay for it, and from that day forward, your home is either appreciating value or sometimes as you mentioned, it there will be a reset and you might depreciate in value.
And a realtor can help you figure that one out based on what you paid for the home and where the value is now.
On average, homes in In our area, well, just if there's none of anything crazy going on, you're looking at a 5% to 7% appreciation annually, just normally.
When the economy tanked in 2006, homes lost 50% of their value. And then they climbed back up again and we had, you know, 2020, 2021, 2019, really from 2011 on, they were growing pretty quickly in you.
They were going, I mentioned people offering you more for the home than what you were asking. That will bump the whole market up because the way we determine value of homes in the neighborhood is by looking at other homes sold in the neighborhood.
And so if somebody offers someone $100,000 over asking, suddenly the whole neighborhood goes up in value. So you've paid, you, you bought your home, you're making payments on it.
So you're also, if you have a loan, every time you make a payment, maybe not initially, because a lot of that goes to interest, but you're paying down the loan, and then you're appreciating in value.
so your realtor will give you what's referred to as a net proceeds. So you can see if you sold the home today, this is what you could anticipate walking away with, and that is your equity.
And it is sitting in your home whether you sell or not. So maybe you want to consider getting what we call a HELOC, a home equity loan, and they will loan you, give you like a line of credit, and you could use that money anyway you really wanted to, and most lenders will recommend that you get that.
Just leave it sitting there so you have it if you ever needed it in an emergency. And that home equity line of credit, like I said, you can pull from it to remodel.
You could pull from it. To go on vacation, what do you want to do? You could pull from it and invest it in the stock market.
You could pull from it and buy another house. Depending on how much equity you have, the longer you're in your home, the more equity you have.
People downsizing, many of them bought their homes in the 80s, maybe the 70s, they may have paid that loan off altogether.
They probably paid somewhere around 100,,000 for their home for just a middle class. So that's a lot of equity.
You could do a lot with that.
- Dennis Day
And how is the real estate agent going to help you determine that?
- Judy Gratton
They do a market evaluation of your home. What have other homes around your home sold for? What is the current competition for
In that area, what are they asking? How long do the homes average stay on market? Do they sell for more than market value?
That all helps you to determine what the current value is of your home when they do that report. And as we've mentioned before, that report is a snapshot current to just today.
If a home in your neighborhood sells tomorrow, it could conceivably change the value of your home. If someone offered $100,000 over asking for that home, it will change the value of your home because now you have a comparable property that sold knowing that it bumped up 100,000.
Everybody goes up. And of course, if that home has 300 square feet more than you do, you need to make an adjustment for that.
If that home was totally remodeled in yours isn't, you need to make adjustments for that. But the market goes up based on what or down based on what home self or right now.
They are going. I know again because we have a shortage of inventory. So we call that a seller's market.
@15:07 - Dennis Day
Yeah, Lake Forest Park. Listings are down 40% from this time last year.
- Judy Gratton
So even though your homes took a dip and they probably the values started to drop about May 15 of 2022 when the interest rates started to climb.
And then they always take a bit of a dip as you go into the winter months. But when you got to January and people are starting to think about moving again, that had adjusted downward to about that point.
Now it's starting to climb again. And now we're in that period of time where you have the most buyers on the market and we're 40% less than inventory.
We have people who want to buy. And so you'll probably see that go back up again. Will it hit what it was in January of 2022?
We don't know yet, but Mike, Mike, It protects the future, which we could try. All right. It's done what the data shows us from the past, but that's how we do our valuations.
And that's how every seller needs to look at their home. It's not what you want for it. Doesn't matter what you want for your home.
It's what the market will bear, what buyers are willing to offer you. So to say, I need this, to get my next home is we would love to say, and maybe it'll work that what you need and what you get are the same thing.
But sometimes people have inflated ideas of what they need, and it's just not going to happen. Especially if you start out by pricing it at what you need, and that's over market value.
Buyers are very smart. Now they have the ability to go online and figure out what the values should approximately be.
And it fits over price. They don't look. You can't say I'll lower it later. You'll lose money by doing that.
- Dennis Day
I have assessed my situation. I found out my equity position. I've talked to a real estate agent, got a good idea what's going on in the market.
I've thought about what I need in my next move. And now you're going to have to make this big decision.
Are you going to buy your next home first and then sell your current home? Are you going to sell your home first?
And then hopefully buy the next one quickly. Or are you going to try and sell on a contingency? So what about the first scenario?
Buy first, then sell your home. Let's talk about the pros and cons of what you need to do.
- Judy Gratton
Well, that is probably the least. Stressful transition for the seller because they know where they're going to go. The issue with that is the first thing they have to do is talk to a lender unless they're paying cash.
And let's say the cash is tied up in the home. That's a well, we'll get to that in a minute.
But if they need to get financing for their next home, the very first thing they need to do is talk to a lender.
Can the lender. Do they qualify? To do what's referred to as a bridge loan. So the lender, and I don't know exactly how these work other than the lender ties both homes into one loan and you can then go buy.
And then as soon as your home sells, that portion of it is paid off. And now you go into a loan without doing another loan.
It just transfers into a loan. The home you bought and that's called a bridge loan and that allows you to make an offer on that home.
Close on it move then sell your home or you know once you have that offer tied up maybe you go ahead and put it on the market.
But you buy first and the loan ties both of those homes together into a loan and it depends on whether not a lender will allow you to do that if you qualify basically based on your credit report your earnings all the things that you would get a normal loan on.
So and they have different names for them but basically they're referred to as a bridge loan because they give you a bridge to go to that new home.
So if you qualify for that then you can go ahead and go out and find a home make an offer get it under contract.
Before you ever consider putting your home on the market it is much you know of course there's always stress.
That's when you're moving. It's one of the top 10 stressors out there, but it's less stressful to do that than it is to list your home first.
So that that by first scenario allows you to know where you're going. And maybe even get go there before you ever put your other home on the market.
Maybe you want to move out and be in your new home and then put that other home on the market.
And I couldn't be appreciating the whole time you're doing that. We do know if the market is the seller's market, a buyer's market is it in transition, your realtor can tell you that question or answer that question.
So that by first then sell is going to be easier for the seller.
- Dennis Day
Then we have the sell first. Correct. by
- Judy Gratton
That can be kind of stressful. It can. A lot of people say, well, I can go out and find a home and make a kitchen offer, contingent on the sale of my home.
You can do that. There's a couple things to consider. What does the market look like? Because if it is a seller's market and there's a shortage of inventory, you are competing with other buyers.
And if another buyer comes into the market who does not have to sell a home. That selling your home is a risk to the seller in that.
What if it doesn't sell? Now, the seller has been on the market for a longer period of time. And if it doesn't sell, the way a contingency works, you promise that you will sell your home within a certain period of time.
If you don't do it, you can cancel the contract and get out of it. Now, the seller is, let's say, been on the market for 180 days because they've been on the market so long.
Buyers are looking at it going What's wrong with it? And so it hurts the seller to take your contention offer when they're getting there's another offer there from a buyer non contention on the sale of your home.
That's the contingency is referred to on the sale of your home. The second reason that's stressful for you is that if you make an offer like that, at least in the state of Washington, the way the document that you're signing and presenting to them reads is that you must put your home on You're the market within five days.
So if your home isn't ready, it doesn't matter. It has to go on the market and it takes normally at least two weeks to really do a good job of getting good, getting the home ready to be photographed, getting the photographs, printing up all the documents, the flyers, the brochures, whatever, getting the signage up, all of that takes time.
So if you go buy a home contingent and you only have five days to get your home on the market,
That's going to be a stressor. So there is another avenue where you have listed your home, you have a contract.
So now you are pending. You are pending. You've gone through if there was an inspection period in that contract, you've put.
So now the only thing is just a successful closing of your current contract. There is the way to make an offer on a home.
Contention on the successful closing, contention on the contract that you already have. That is stronger and the seller is more likely to accept that than contention on the sale of your home where you have anything listed it.
So that's kind of a middle of the road place. And will they accept that offer over one that does not have a contention scene like that at all?
It's always the seller's choice. Maybe if you're on
- Dennis Day
If you're not going contingent, you've sold your home. What are some strategies that a seller can use to give them more time?
- Judy Gratton
When you get an offer from a buyer, your agent can talk to you about what you want to it.
maybe you've already had this conversation. How long would it take you to move once a home closes? It can you start packing now?
If you just go by the way the pre-printed contract reads, it reads that the buyer gets the home the day it closes.
That means you have to be out before you get Your money and that's that can be a little difficult.
So especially in a seller's market, like what we're in right now, shortage of inventory, fires are willing to give things to get a home.
You could ask, can we extend the closing, make it a longer period to close. Most closings are 30 days.
Can we have 45 to the date of closing so that we can be out or can we rent back after closing?
And dependent on the agent and the circumstances, you know, what you would have to pay for that rent back is up to what can be negotiated, anything from zero to what their mortgage payment is, or maybe even more.
Again, it would depend on the negotiations between the buyer and the seller once there's a contract. But there is that option that we can keep you in your home after it closes to give you the ability to
Transfer to your new home, Marysville.
- Dennis Day
I want to caveat to that, though. My wife and I did an extended closing. We moved from our very first home, which was kind of a dump, to our current home, which is great.
And we sold and then did a 90 day close because we were in a super overheated market like we've seen so often.
Hoping that we could find that next home within that 90 days. Well, we did. But in that 90 days overheated market, we lost all kinds of equity.
just, you know, we, yeah, so.
- Judy Gratton
And at the home you were trying to buy was going up in value. so you made an, you locked into a contract on your home at a price point and continued to grow.
And the home you bought was more expensive than you anticipated. It would be 90 days. Yes.
- Dennis Day
Yeah, we had to go out of our budget and I'm glad we did, but it was also a stretch for a couple of years where we did go to movies and we didn't go out to eat and we didn't do these things because that payment, I mean, we had to pay $30,000 more than we had budgeted.
Right. Well, today's market, $30,000 doesn't seem that much, but at that time, this is 1997. That's a lot of money.
So it was tough. I'm glad we did it because we got into great home and great neighborhood, et cetera.
We had to sacrifice for a couple of years, but it, you know, it is an issue to think about and that's where your, your realtor can really help you and your, and your lender.
- Judy Gratton
We're communicating with these people. They're helping you make these decisions based on how you're going to be affected in the long run.
It's all about how you're going to be affected by the contracts you write and by the homes that you buy and all of that.
And that's why it's so important that you have people that you can trust. It's not about who's the cheapest realtor or the cheapest lender really because in the long run they're trying to get you the best deal.
And so it's more about what they know and that you feel you can trust them.
- Dennis Day
You know what the people we were talking to this morning was if you had a financial planner. Well, don't you want regular updates about what's going on with your investments, right?
- Judy Gratton
Absolutely. Absolutely.
@28:48 - Dennis Day
Right. So why wouldn't you want that from a realtor?
@28:53 - Judy Gratton
Yeah. Knowing that equity position. Where are you? Where are you? Hey, when was the last time some. On Central Report to tell you where your home is today.
And I'm not talking about the tax man because those are two different things. And frequently the tax value is undervalued from where your home would actually sell for.
Sometimes it's right on, but not very often. So that we do that. We do for our clients when they close on a home every year on that anniversary date.
They get a report from us, but we also provide them with just a monthly report that is sent out automatically and it tells them based on their equity, this is what you have.
And a lot people love it. So that's something that if you're not working with us, make sure to ask, and I get this, can I stay informed?
- Dennis Day
So the realtor should be doing that. as a consumer, you need to look at the realtor as consumer. I'm going to talk about the biggest asset that you have.
Most of us don't have giant stock portfolios and we did an invest in Uber and Apple and all that stuff in 2000.
And so your home is your biggest investment. You need to kind of keep track of it as an investment.
It's not just a place to live. It is your investment.
- Judy Gratton
And that's true about taking care of it. That's true about knowing what the value of it is that yes, and having that person that you trust that you have dealt with before and they did a good job for you is huge.
It's like you wouldn't just go to any, well, I wouldn't go to any dentist because I don't like Dennis.
So I have a dentist. I trust and I have a doctor I trust and I you know I have a lawyer I trust all these different people that you you should just make sure that whoever it is you're dealing with you trust your lender same thing because they're good lenders good realtors are not just trying to sell your home or sell you a new home they're there to provide you with information all along the way.
- Dennis Day
So do we want to wrap it up I think that's an app.
- Judy Gratton
Let's see budget. I think that that really is about it you know it's it depends you know just to recap it's like what are you trying to achieve why does your house not work for you anymore and do Get perfect.
Professionals involved, both a realtor and a lender, and let them help you make the proper decisions so that you're informed and you know what you're getting into.
That's how you make a move at all. In your first home, into your downsized home, those points are really critical.
Do not. Do not start looking first, please, because invariably what happens is you find the home you absolutely love and you are not prepared to buy it because you either haven't talked to your lender, you haven't sold your home and you don't understand what that means and you lose it.
It goes to someone else, especially in this market, they don't stay on the market. And I promise you, if that happens once, you will compare every single home that you look at thereafter to
The one you lost. How do I know this? Because I get it. So I did it personally. Personally, good.
Before I was in real estate, fell in love. And it's just so much easier on you to be prepared.
So when you find the home you love, you can make the offer on it, put your best foot forward.
And then if, if it was meant to happen, it will. You might lose it still if they're if you're in competition.
But you at least know you did the best you could.
- Dennis Day
Well, I hope that gives you some more information on how to handle these life changes where you might need a different place to live.
It's home is not working for you because we are getting your edge how to write size your home and life podcast.
I'm Dennis Day. Want to say goodbye, Judy?
- Judy Gratton
Bye.
- Dennis Day
Goodbye. Thank you for joining us. See you next time. Thank you,