One group that gets squeezed extra tight in a seller’s market are buyer’s that need to sell first. The downsizers or upsizers. This is a very common situation in real estate. You bought your starter home, but now you’re a little more financially fit and ready for a bigger house, or a larger lot or whatever your need is. Or maybe it’s just the opposite, where your need for a large house is now gone, maybe you want less yard to mow or need single floor living. Either way it often creates the challenge of wanting to purchase a new home, but needing the funds from the sale of your existing home to make that happen.
When there are already very few houses available, you need to bring your most competitive offer. So odds are you will be going up against a buyer that is ready to buy right now. Not after their house sells.
This is challenging, but not impossible. I had a few clients in this situation in 2020 & 2021 and we were able to make it work. It’s important to understand all the moving parts and have realistic expectations. Here are my tips.
If you can make an offer on the new place without it being contingent on a sale, do it. There are two parts to this. The logistics and the emotion. Many buyers assume they need to sell their current house in order to qualify for a new mortgage. That might not be the case. It’s worth talking with your lender to see if you would qualify for a new mortgage without selling first. Which leads to the second part, can you stomach it? In this scenario, you would list your house for sale and make an offer on the house you want, but the purchase would happen whether or not the sale did. So, if your current house sold right away you could still use the proceeds towards your purchase. The risk you take is that you might not get an acceptable offer right away on your current place. Are you the type of person, that the stress of that unknown will be too much? Then do not do it. But if you’re up for it, it does make you more competitive when making the offer on the new place because it won’t be contingent on a sale. And you can certainly minimize your risk by working with your agent to make sure the house you’re selling is priced correctly and any recommendations to help it sell quickly have been done.
If you can’t qualify or don’t feel comfortable, how can you still get the house you need. First, meet with your agent, listen to their advice and get your house on the market. When you are ready to make an offer on a new house, sellers will not take you seriously if yours isn’t for sale yet. Now the hard part, I recommend waiting a week or 2 after new listings on the market before you set up a showing to see it. Listen to your agent’s recommendation on this, but in most markets if a house has 10 showings the first week, you will not be competitive with an offer contingent on a sale. If it’s still available in a week, set up a showing to see it.
Be prepared to pay full price. You’re going to have to give the seller a reason to think you’re worth waiting for (waiting for your house to sell). Since your terms are likely not going to be competitive, your price needs to be. My rule of thumb is if you must ask for one thing because it’s a deal breaker for you (in this case having it contingent on a sale) ask for as little else as possible. That means don’t also ask them to paint the deck or include the swing set or allow early occupancy. The less you ask for the more likely they are to accept your one condition. The one condition you need to make this work.
Ultimately, keep an open mind. You may end up finding a house that suites all your needs but hasn’t had cosmetic updates since 1973. If it meets your other needs (size, location, etc.) consider it. Because the lack of updates may be the reason it’s still available for you.
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