Competitive Housing Markets Mean You Need to Make a Competitive Offer

No matter where you may be moving, chances are the housing market is competitive. If you’re house hunting, you’re going to need to make a competitive offer or risk having other offers beat out yours. You’re not the only one on the hunt, so make sure your offer stands out so you can save time, frustration, and even costs.

Looking at some of the hottest national markets, we can see home sales and prices are only rising. Texas, for instance, continues to see healthy increases, showing 6.4% growth in annual home sales. According to CCN, “2019 results are outpacing 2018’s performance and one Texas A&M economist predicts 2020 should be even better.” Thanks to the booming job market in Texas, demand is driving housing prices higher and higher every year.

Texas isn’t the only state seeing a strong job market which inevitably leads to a competitive housing market. Colorado and Georgia are also experiencing growth. The Colorado housing market increased 9.1% annually in the seven-county Denver metro area and 5.3% statewide, with the median price of a single-family home rising by 6% annually.

What do all of these stats have to do with you? It means if you want to buy the house you have your heart set on, you’re going to have to make a competitive offer the seller can’t refuse. Your offer can’t look like the others – but how do you get the seller’s attention with your offer without breaking the bank?

Making Your Offer Super Competitive: 1 Secret with 3 Benefits

You may not be moving to Austin or Denver, but most hot job markets around the country mean there are people just like you needing to move into a new home. You are likely house hunting with hoards of others who are looking for similar things when buying a home: close-in neighborhood, proximity to work, good schools, updated features, reasonable price, etc. What can you do to make your offer the one that stands out? We’ll tell you the secret that has multiple benefits that will get your seller excited to say yes to your offer.

Make an All-Cash Offer

The best kept secret to a super competitive offer is this: make an all-cash offer. It may sound out of the question, but hear us out. An all-cash offer is highly attractive to your seller, more so than an offer that is contingent on the buyer obtaining financing or selling their existing home.

When you make an all-cash offer, you are telling the seller you are not only serious, but you can pay cash and are ready to move forward with the transaction now. For the majority of buyers, that’s all they really want to know. They want assurance that the offer will result in closing as soon as possible. After all, they want to move, too. The longer their transaction takes, the longer they have to wait to move, the more risk they have for losing their dream home, and the greater costs they have from paying two mortgages.

Here’s why an all-cash offer wins bids:

It Removes Contingencies

Even though contingencies are common and accompany the majority of offers, the more you can remove, the more competitive your offer will be. Contingencies say your offer is good only if certain conditions are met. The most common contingencies are home sale contingencies, financing contingencies, appraisal contingencies, and inspection contingencies. What if you could remove three out of those four? That’s exactly what all-cash offers do.

Obviously, if you’re paying with cash, you don’t need a lender to slow down the process. You don’t have to fill out all of the lender’s paperwork, supply all of the required financial documents, or wait on an approval. Here’s an added bonus: it also means you don’t need the bank to appraise the property. You can save weeks or even months on the closing process simply by removing the financing and appraisal contingencies.

But there’s more. All-cash offers also mean you don’t have to sell your existing home first before you buy your next one. The lenders are the ones who make this such a sticking point. They are loaning you their money and want to make sure you can pay them back. If the lender calculates that you hold two mortgages, they get nervous.

Even if you have an ample income, it’s risky for the lender. You could lose your job and not be able to pay two mortgages at once. Because of this scenario, homebuyers who seek financing typically have to sell their existing home first before they can purchase a new home. Not fun for buyers but something they’ve gotten used to because it’s the way real estate has always been done.

The all-cash offer takes away all of that frustration and uncertainty, allowing you to purchase the home you want, when you want, and sell your existing home and move when it’s convenient for you. Huge win for you while at the same time, it gives your sellers exactly what they want – a clean offer with minimal risk.

A quick note on the inspection contingency: it’s a critical contingency to have and this is why the majority of offers come with a home inspection contingency. You want to protect yourself from purchasing a home with hidden damage or that needs expensive (and often, unexpected) repairs. An independent, licensed inspector will spend hours at the property you want to buy and thoroughly assess the current “health” of the home. You’ll receive a lengthy assessment you can use to negotiate the price, repairs, and/or the entire offer.

It Poses Less Risk

In a nutshell, all-cash offers pose less risk for your seller. When they don’t have to worry about your financing falling through, the appraisal coming back lower than your purchase price, or your existing home selling first…that’s when they get excited. You’ve just removed the most common reasons for an offer to fall through.

It Results in a Faster Closing

You may not have all of the cash available to make an all-cash offer, but a company called Homeward does and they’ll let you use their cash for a 1.9% fee. All you have to do is apply (which can be done in about 10 minutes). Once approved, they will assess the value of your current home and give you credit for your home equity so you can make your all-cash offer.

With Homeward, you don’t have to get a lender involved or sell your home first. Once your new house closes, you can take up to six months to sell your existing home while you lease back your new home from Homeward. As soon as your existing home sale closes, you get a new mortgage on your new home and repurchase it from Homeward. If for some reason your old house doesn’t sell, Homeward will purchase it from you for a fair price, agreed to beforehand as the “floor price”.

It’s the easiest way to buy residential real estate and it’s the best way to make a super competitive offer. With Homeward’s cash in hand, you can get the house you want, save money, and move when it’s convenient for you. The sellers get what they want and you do, too. All-cash offers streamline the process and make house hunting fun again.

What Is a Kick Out Clause?

Selling or buying a home has traditionally been all about perfect timing. Buyers typically must sell their existing home first in order to obtain the funds to purchase their next home. Many buyers prefer to find their new home before they sell their existing one so they don’t have to move twice. So, what do you do if you’re a buyer and find your dream house but haven’t sold your existing one? You typically go ahead and make an offer on your dream home, but you include a home sale contingency or a “kick-out clause.”

A home sale contingency is part of a buyer’s offer that says they will purchase the home only if they sell their existing home first. There’s a problem with this contingency, however. It asks the seller to take their home off the market and wait…wait for you to hopefully sell your home quickly. The period of time to sell a home typically ranges anywhere from 30 to 90 days. If you can’t sell your house in this timeframe, you have the right to cancel your offer and receive your earnest money back.

What’s in it for the seller? Not much. They lose that earnest money and have to relist their home, going back to square one. They’ve lost all of that time waiting on you. Because an offer with a home sale contingency offers little advantage to the seller, many decline these offers. But there’s a way to make them a bit more appealing to the seller – by allowing the seller to include a “kick-out” clause.

The kick-out clause simply states that the seller is able to continue marketing their home during this “contingent” period. You still have your offer on the table, but if the seller receives a non-contingent offer they want to take, they can inform you of the new offer and you must make a decision within 72 hours (or whatever time period was agreed upon). You have two options:

1. You can cancel your contract, receive back your earnest money deposit, and free the seller to accept the non-contingent offer.
2. You can proceed with the purchase of the home but must remove the home sale contingency. This means you must come up with the financing to secure the new home, providing evidence that you have done so.

The Benefits and Disadvantages of a Kick-Out Clause

There are pros and cons with a kick-out clause for both you and the seller. Keep in mind, however, a non-contingent offer without a kick-out clause will still be more attractive to the seller. The less friction in the home sale transaction, the better. Sellers simply want to sell their home. The more strings attached, the more likely they will want to look at other offers. But, depending on many variables, such as the current housing market, how much time they are willing to wait to sell, how long their home has been on the market, and how many reasonable offers they’ve received, accepting an offer with a home sale contingency and a kick-out clause may be their best option.

For the Seller

So, why would the seller want to include a kick-out clause in their offer? Obviously, it lowers the seller’s risk and gives them more flexibility. If a seller has your offer and another on the table, both of which have a home sale contingency, your kick-out clause automatically makes your offer more attractive. It gives the seller wiggle room. Your offer may end up being the best one at the end of the day, but the seller also has the ability to keep their home on the market in case something better comes along.

On the other hand, a kick-out clause still has some risk for the seller. If they receive an attractive, non-contingent offer, they may have to wait up to a week before you are released from your contract. The new buyer may not be willing to wait that long or they may find another home that isn’t already under contract.

For the Buyer

The kick-out clause is beneficial to a buyer because it allows you to find a home before you sell your existing one. You can’t take long, however. Once you make your contingent offer with a kick-out clause, the clock begins to tick. You must sell your home within the allotted timeframe or risk losing the home to another buyer. Basically, the kick-out clause gives you a little breathing room.

The kick-out clause may buy you time to sell before you buy, but it’s not without its stress, either. Thankfully, you still have another option, one that guarantees a smoother, calmer home buying experience.

How to Avoid a Kick-Out Clause

The kick-out clause clearly has its benefits. It softens a home sale-contingent offer to make it more appealing to a seller. But even with the amendment, you’re still at a disadvantage if a non-contingent offer comes in. The only way to level the playing field is to make a non-contingent offer.

There are several contingencies that can be added to a home sale contract, and in fact, 76% of contracts have some sort of contingency. The home sale contingency is common, but there is also the financing contingency, the appraisal contingency, the inspection contingency, and the title contingency. Most sellers are used to receiving offers with at least a couple of these contingencies included, but if you can remove as many as possible, you will strengthen your offer. You’ll also reduce the time it takes to finally get the house you want.

It’s never a good idea to remove the inspection or title contingencies. The inspection contingency makes your contract dependent on the condition of the home, as inspected by an independent third party. If the inspector finds damage or failures that the seller is unwilling to fix or if the seller is unwilling to reduce the sales price to allow for repairs, you don’t want to be stuck buying the house. You need to know what you’re getting into and have the option to cancel your contract if you and the seller can’t come to an agreement.

The title contingency is also common and protects you from purchasing a home that has issues with its record of ownership. Typically, the types of issues the title company may find are that a previous lien was never settled or property taxes weren’t paid. If this happens to you, you have the right to back out of your contract and receive your earnest money back. Fortunately, most title issues are easy to resolve and, therefore, don’t result in you losing the house.

It’s more common for buyers to remove the home sale contingency, the financing contingency, and the appraisal contingency by making an all-cash offer. All-cash offers are beneficial to both you and the seller. Here’s why:

The Buyer

For you, an all-cash offer means you will almost always beat out an offer with multiple contingencies. Even if you give the seller the kick-out clause option because you haven’t sold your existing home first, there’s a risk they will get a better offer. You can also expect to save up to 5% on the sales price with a cash offer, because it’s more attractive to the seller. You don’t have to wait long to close, either. Because your contract isn’t dependent on a lender approving you or appraising the new home, you can close much faster.

The Seller

All-cash offers are the ones that get a seller’s attention. They know all-cash offers have less risk of falling through, are more reliable, and close faster than any other offer. They can stop showing their home, start packing, and move out in days versus months.

How to Secure Cash to Make an All-Cash Offer

If you don’t already have access to enough cash to make an all-cash offer, consider working with Homeward. Our company is changing how real estate is bought and sold. To get started, all you have to do is go through a brief online application process. Once approved, we will assess the value of your existing home and confirm your home equity.

You can use our cash to make an all-cash offer, without a home sale, financing, or appraisal contingency – or a kick-out clause. You pay us 1.9% for this capability, then rent your new home from us until your existing home sells. Once it does, you close on your new home and take over with your new mortgage. If your old home doesn’t sell in six months, we’ll buy it from you at a pre-agreed floor price.

This is the best way to remove all of the stress that comes with traditional home buying. No more playing the frustrating timing game. Instead, you get the home you really want when you want it. You don’t have to sell first or place contingencies and a kick-out clause to buy you time. The home is yours because you bought it with cash. Doesn’t get any easier than that.

Need to Sell Your House Fast?

There are several reasons why a homeowner needs to sell fast. First and most likely, you’ve found a home you really love. If you’re like the majority of Americans, that means you’ll have to sell your existing home first if you are going to get approved for a mortgage to finance your next home. That puts you under a lot of pressure to sell quickly, or you risk losing your dream house to someone else. If only you could buy the home you want before you sell. More on that later.

Of course, you may also need to move for a job. Relocating for a new job opportunity often requires you to have to sell with little notice. If you don’t sell in time, you may have to move and try to sell remotely. Not exactly ideal.

There are other reasons, too. Perhaps you’ve lost a job and can no longer afford your home or you’re a recent empty-nester and want to move out of a higher property tax area.

‍

No matter the reasons, selling your home fast may not be easy. The speed at which you can sell your home is dependent on multiple factors, including:

• The current housing market
• The desirability of the location of your current home
• The current state of your home
• The price you ask for your home

‍

Let’s break these down.

The Current Housing Market

It’s important to understand the housing market in your city to get a little perspective on what you might expect if you put your home on the market. National market data currently has us in a “very hot” seller’s market. That means there is more demand for homes than there are homes on the market, giving you a better chance to sell your home with less inventory for buyers to choose from. But, depending on where you live, your market may differ. It’s important to do your research to find local trends.

In a seller’s market, you’re likely to have more offers faster than in a buyer’s market because buyers know they have to act fast or risk losing the house to others who have offers on the table. This is an ideal situation for you as a seller and may reduce the sales time dramatically. Of course, on the flip side, if you’re in a buyer’s market, you may have to be more patient as offers may be slower to come.

The Desirability of the Location of Your Home

No matter if you are in a buyer’s or a seller’s market, the location of your home within your city matters. Close-in neighborhoods often get more attention from buyers versus more rural neighborhoods. There’s a buyer for every house, but if you want to sell quickly, having a home in a desirable school district and near major employers, downtown areas, recreational areas, and/or entertainment hubs will give you the advantage.

You can determine the popularity of your area by looking at recent sales prices in various neighborhoods in and around your city. Typically, housing prices are higher per square foot in highly-desirable areas than those in other locations. People are willing to pay a premium to be close-in to areas they frequent. Evaluate what houses are selling for in your area and compare them with market data to see where you stand. You can also look at market data to see how long houses are sitting on the market in each local zip code. These pieces of data are good indicators of what you can expect.

The Current State of Your Home

There are two kinds of buyers: ones that want move-in ready homes and ones that are willing to put in a measure of work to get a home where they want it. Take a look at your home inside and out. If you were either of these types of buyers, where would your home land?

For most homeowners, you will want to take a little time to make some basic improvements to your home before you put it on the market to decrease the amount of time it takes to sell. Buyers want to see, at the very least:

• The home is clean and well-maintained
• There are no obvious signs of damage, particularly those that would be costly to repair
• They can fit their own things into the space
  ‍

To increase the odds that your home will attract buyers and not repel them, you can do simple things like thoroughly clean each room of your house and your outdoor areas. Clean out any clutter and furniture that doesn’t absolutely have to be there. You want your home to look open, spacious, and full of light. Buyers want to be able to imagine their things in your home, so the more “stuff” you have, the less likely they can imagine living there.

You may also want to consider staging your home with a professional stager who is knowledgeable about what buyers want to see. Staging your home has been found to help it sell 73% faster. Stagers can help you remove unnecessary items, arrange furniture in a modern way, suggest cost-effective updates, and ensure there is proper lighting. Some real estate agents offer this service or can connect you with reputable companies in your area.

Finally, you can get your home pre-inspected by a professional house inspector to 1) see what repairs you may need to make before you put your home on the market, and 2) eliminate the sometimes time-consuming process of having the inspection done after an offer is made.

The Price You Ask for Your Home

Of course, you want to get the most money for your home; everyone does. But how fast you sell your house is directly correlated to your asking price. There is a sweet spot in any market and finding it isn’t always simple. The good news is, however, that you can sell any house quickly if you ask the right price.

If your ultimate goal is to sell your house fast, you may want to consider lowering your asking price to below market average for your area or accepting a “low ball” offer that’s still reasonable. By making your house a “good deal,” you will attract more buyers, even in a buyer’s market, and likely get multiple offers quickly. You can work with a real estate agent to help you find that sweet spot, or you can do your own market analysis with online tools to determine where you should price your home.

The Best Way to Eliminate the Need to Sell Your House Fast

If you are feeling pressured to sell quickly because you found another home you want to buy now, you have another option. You can use Homeward to make an all-cash offer on your new home first and then take your time selling your existing home. That way, you can move when you want and get the maximum value for your existing home. This modern way of buying a home is more convenient for you and much less stressful. Here’s how Homeward works:

1. Get approved. Homeward offers a simple online application that takes about 10 minutes to complete.
2. Make an all-cash offer on the home you want. All-cash offers are 2x more likely to be accepted than offers that are contingent on a home sale or financing. Plus, they can often save you up to 5% on the sale price.
3. Move into your new home and list your existing home. Rent your new home from Homeward until you sell your old home for up to six months. If it doesn’t sell, Homeward will buy it from you at a pre-agreed, fair market price.

‍

If you’re looking to buy the house you want now without having to sell first, and maximize the equity in your current home, Homeward is a great option.

‍

Buying a Home Is Stressful Enough Without Contingencies

When you’re ready to purchase a new home, you often don’t think about all of the negotiations, red tape, and competition you might be facing. Will you offer full asking price? Can you remove contingencies from your offer? Will your existing home be sold in time? It would be great to make an offer and know you will be able to move soon. Unfortunately, real estate isn’t bought and sold that way. It takes time. It also causes home buyers and sellers alike plenty of stress.

One of the more nerve-racking elements of buying a home is the contingencies. Investopedia defines contingency this way: “A contingency clause defines a condition or action that must be met for a real estate contract to become binding.” In the most basic terms, your deal is dependent on several things happening. Those things are largely unpredictable and, therefore, stressful for both you and the seller. Many of the contingencies are included to protect you, the buyer, but they also give the seller a lot of uncertainty and can make your offer less competitive.

There are a few types of contingencies, each of which can cause the real estate transaction to sour if they aren’t met. You can remove some contingencies (we’ll go through how to do that later), but let’s make sure you understand the most common contingencies out there.

Financing and Home Sale

There is an inherent problem with traditional home sale transactions. Unless you have a boatload of cash at hand, it typically requires the home buyer to sell their existing home first in order to have the funds to purchase the new home. Most banks won’t approve you for a new mortgage until your existing one is paid in full. These reasons are why approximately 44 percent of closed home sales include a financing contingency.

It can be challenging enough to find enough cash for a down payment. With the average home price in the United States around $231,700, and 2-3x that in more expensive urban areas, it’s no wonder few people can pay cash for a home. If you don’t have all of the cash to pay for the new home, how do you time the market so you sell and close on your home at precisely the right time? What if you sell too soon, before you’ve found another home? What if you sell too late and someone gets the home you had your heart set on because they made a more competitive, non-contingent offer on it? Financing a home with a mortgage can cause you to wait 30-60 days more to get the loan closed and approved.

Inspections

Finding the cash to buy a new home is only part of the problem. There all kinds of issues that might cause you to want to back out of a sale, and that’s why there are matching contingencies for each of these major items. The new home needs to be inspected by an independent inspector. You don’t want to buy a new home, only to discover a few months later that you have a leaky roof or a cracking foundation. Nearly 60 percent of offers have a home inspection contingency.

Home inspectors are there to help you and the seller understand the condition of the home. It’s up to you and the seller to determine which issues need to be fixed and how they will be handled. While you may be willing to discount some noted problems, such as bent gutters and chipped floor tile, there may be deal-breaking issues that force you to rescind your offer. These often require negotiations on how those repairs will be paid for. For example, the seller might agree to let you take the repair costs out of the home price. No matter what you negotiate, you’ll need an inspection, plus contractor bids for repairs to understand what those repairs will cost.

Appraisal

Your lender will also want to do an appraisal if you are seeking to finance the home with a mortgage. They want to make sure the asking price is reasonable compared with what they assess the value of the home to be. Remember, you’re using their money to purchase the home and they don’t want to pay more than what the home is actually worth.

Your lender will send out a licensed appraiser to the home you’re wanting to buy to survey the property. They’ll then combine his or her evaluation with tax records and comparable homes that have recently sold in your area. From there, the appraiser will provide you and your lender their appraisal report that shows the appraised value. If the sales price is at or below this value, you’re in business. Otherwise, you’ll either need to find more cash to put into the deal to cover the difference, negotiate the price down, or rescind your offer and look elsewhere. The appraisal contingency allows you to try any of these paths. Without it, you’d be forced to move forward with the purchase.

There are a few more contingencies, but these are the most common and the ones you will most likely have to deal with. Here’s the rub: the more contingencies attached to your offer, the less competitive your offer will be. Home sellers don’t have to accept your offer. They may want to wait for a better offer or they may have multiple offers on the table and they’re going to gravitate towards the one that will be the least stressful, close the fastest, and have the lowest risk of falling through. Those contingencies all mean certain things must happen in order for the transaction to happen. The more contingencies you can remove from your offer, the more attractive your offer will be.

How to Remove Contingencies to Sweeten Your Offer

Some contingencies are actually a good idea, such as the inspection contingency. Other contingencies just complicate matters and can detract from your offer. There are ways to remove a few contingencies that will make your offer stand out amongst any others and speed up the sales process to benefit both you and the seller.

First and foremost, the home sale contingency has to go if you want to make your offer more attractive. If you’re trying to win a home in a competitive market, it’s almost a given that you can’t make a home sale contingent offer and succeed. The real estate market is highly unpredictable. Even the most seemingly solid offer can fall through. Your seller knows this. If your offer on their home is dependent upon you selling your existing home, they know that’s a huge risk. It could take months for your home to sell and close, and the deal with your buyer could fall through at any moment. That means your home seller either has to wait it out with you or move on to an offer that isn’t contingent on a home sale.

Before you start thinking most offers will have that same home sale contingency, remember that not all home buyers are in the same boat as you. They may not own a home they need to sell first. They could be renters, relocating, or have enough cash to secure the home without financing. How can you compete with them if you’re offer is tied to you selling your existing home first? You can’t.

Then, there’s the financing contingency. While financing contingencies are quite common, they also introduce risk for the seller that your offer will fall through if you can’t get approved for a loan. All-cash offers instantly remove this contingency. They also remove the lender appraisal contingency. Here’s how.

To get approved for a mortgage, most homebuyers need to have their existing home under contract and scheduled to close at or before their new home purchase date. Why? Because most buyers can’t meet mortgage approval requirements when the lender calculates that they hold two mortgages, even if it’s only going to be for a short time. With an all-cash offer, on the other hand, you never have to deal with a lender at all, nor do you need them to appraise the home you are buying. Cash offers are simpler and significantly faster for you and the home seller, making your offer more attractive than any offer that includes financing, appraisal, and home sale contingencies.

You’re likely wondering how you can get that much cash without dipping into retirement accounts or tied-up investments, something many experts advise against. That’s where we come in.

Homeward is different than a traditional lender. You can apply online in less than 10 minutes. We will assess the value of your existing home and give you credit for the equity in your home. We then give you access to our funds so you can make an all-cash offer on your next home. Then, once Homeward has secured your home, you sell your current home and get a mortgage to buy the new home from Homeward and pay a 1.9% fee in addition to all normal closing costs. Sellers often give discounts for all cash offers or may be willing to cover some or all of the Homeward fee in order to avoid a contingent offer scenario.

Not only does the all-cash offer bolster your offer by removing some contingencies, but it also eliminates the need for you to sell your existing home before you purchase your new home. You can either move into your new home immediately after purchasing it, while you’re selling your old one, or you can stay in your existing home while you make renovations on your new one. Either way, you’re in control of when you move.

You can rent your new home from Homeward for up to six months until your existing home sells. Once it does, you get a traditional mortgage and use the funds to buy your home back from Homeward. If for some reason your existing home doesn’t sell, Homeward will buy it from you at a fair price you’ve both agreed to in advance.

This is the modern way of buying a new home and one that is gaining steam as people are realizing the many benefits of all-cash offers. If you are looking to remove contingencies from your offer so it will be more attractive to home sellers, close faster, and enjoy the freedom to move when you want without worrying about selling first, this option is definitely worth investigating. To learn more, read about How Homeward Works.

The Magic Number

Ah, to have a crystal ball. Every homeowner hopes to sell their home quickly so they can move on to the next, but there’s a huge unknown in the picture: how long will it take to sell your house?

One of the most frequently asked questions a real estate agent receives is “how long will it take you to sell my home?” If an agent answers that with a hard number, find another agent. There’s no way an agent can determine how long a home will take to sell. There are simply too many variables to answer that question with confidence.

A few of the more common variables are the following:

The Housing Market

If you look at some of the hottest housing markets in the country, in states like Texas, Colorado, and Georgia, you can get a sense of what you may expect, at least if you live in a similar market. The average number of days Austin, Texas homes spent on the market in 2019 was 48 days. In Denver, Colorado, houses can sit up to 65 days on the market, and in Atlanta, Georgia, you can expect to wait about 40 days to sell your home.

Of course, if you live in a slower market, you may be looking at considerably longer lead times. It also depends on where in your city you live and on the condition of your home. Remember, those days on the market are averages. Some houses can take months to sell while others only days.

Interest rates and seasonality also impact how long it will take your home to sell. For example, interest rates are cyclical, they can be up one year and down the next. When they go down, demand typically goes up, and homes sell faster. When they go up, the opposite can happen. Seasonality, also impacts demand, especially in areas where there’s a big temperate change between summer and winter. A hot summer housing market can quickly turn cold in the winter. The local job market, consumer debt, and other economic factors also come into play. Those factors also change regularly throughout the year.

Location, Location, Location

It may be a cliché, but it still rings true: the location of your home makes a difference. Location can mean several things. First, your city. If you live in a city with a thriving job market, you’ll have a better chance to sell your home quickly. As job seekers and new hires move to your town, they’ll be looking for housing.

Looking a bit closer to home, you can consider the area of town your home is in and even the neighborhood. Does your home have easy access to major employers, transportation, good shopping options, and area attractions? Is it in an area with a desirable school district? All of these factors can attract or repel potential buyers.

The Asking Price

How you price your home is another consideration of how fast you can sell. Homeowners frequently want to sell their homes for more than it can reasonably go for on the open market. Typically, emotions are to blame. Homeowners attach the effort they’ve put into maintaining their home and the memories they’ve shared there to the asking price. The unfortunate truth, however, is that the market doesn’t care. Nearby recently sold homes in similar condition to yours are the best predictors for how much your home will sell for.

If you want your home to sell quickly, you must price it at or slightly below your competition. You can work with an experienced real estate agent who specializes in your particular area of town or you can sell your home on your own using pricing tools and research. Any house can sell if it is priced right. Take out the emotions and look at your home as an objective buyer would.

The Condition of Your Home

The condition of your home plays a major role in how quickly your home will sell, too. There’s plenty you can do to get your home in tip-top shape to attract buyers. Simple updates can go a long way, like replacing dated fixtures and lighting, painting walls, and sprucing up the landscaping. Deep cleaning helps as well. Having your carpets and windows professionally cleaned and clearing out the clutter, for example, makes your home more attractive. Many real estate agents and homeowners also swear by staging. When a home is properly staged, it can help it sell 73% faster.

Does your home need a lot of work beyond cosmetic upgrades? You can either pay for significant repairs before listing or just reduce the price so you can sell now. Some buyers desire fixer-uppers but only if they can purchase the home at a fair price. Your buyer will still want an inspection to ensure there aren’t any other major issues, but if it’s just cosmetic upgrades you’re wanting to avoid, you can account for those by pricing your home accordingly.

The Competition

Even when all of the above stars are aligned, you still have to deal with the competition. Your home is likely not the only home potential buyers are evaluating. Any home could offer more desirable updates, a better lot, a more convenient location, a better asking price, and a dozen more personal preferences that you can’t control.

Whether you sell your own home or enlist the help of a real estate agent, you’ll want to make sure your home is priced with as much research backing it as possible. That means you need to know as much as you can about the other comparable houses that are for sale. Make your house as competitive as you can with the time you have, including lowering the asking price if needed.

How to Move Quickly No Matter The Market

As you can see, there’s quite a lot to consider before you can even begin to guess how long your home will take to sell. If you’re looking to move quickly, you may not have the time to make updates, for instance. But, there is a way where you can eliminate all of the stress and hassle associated with trying to sell a home quickly.

Buyers who work with Homeward can buy their new home first, and then sell their existing home for its full market value after. Homeward lets you use their cash to make an all-cash offer on your new home so you can secure it. Then you list your existing home, sell it, and get a mortgage to buy your new home back from Homeward. The advantage is that you can move into a new home whenever you want and then sell your existing home. There’s no pressure to sell quickly or worry about how long your house will take to sell.

Here’s how it works.

First, you fill out an application to get get approved. Homeward will assess the value of your existing home and approve you based on your financial situation and on how much home equity you have. Then we’ll tell you how much you’re approved for so you can go make an all-cash offer on a property for up to that amount. All-cash offers are twice as likely to be accepted over financed offers and can save you up to 5% off the purchase price.

After you make your cash offer on the new home and it is accepted, you can list your existing home for sale. If you want to move before it sells, you can because you’ve already purchased your new home using Homeward’s cash. You just rent your new home from Homeward until you sell your old one. You have up to six months to sell your existing home and if you can’t, Homeward will buy it from you at a fair price that you both agree to in advance. Once you close on the sale of your existing home, you get a traditional mortgage and buy your new home back from Homeward.

This new way of buying and selling real estate results in a better deal for you, less stress, a guaranteed sale of your existing home, and a cash offer on your new home that’s more likely to beat out other offers. If you haven’t looked into this option yet, you may want to before you decide to list your home or buy a new one. It could very well be the easiest way to move quickly without worrying about all of those other variables.

Start your application today.

‍

A Buyer’s Market

A buyer’s market is defined as a situation in which supply exceeds demand, giving purchasers an advantage over sellers in price negotiations. When it comes to the real estate market, a buyer’s market means there are more available homes on the market and fewer active buyers, potentially forcing sellers to lower their asking price to attract buyers who have the pick of the litter.

Because inventory is high, it’s common to see houses stay on the market for a longer period of time. This gives buyers an added advantage in that you can often negotiate down the asking price because the sellers may be more willing to make some concessions to finally sell. This advantage may not go into effect until the home has been on the market for at least 30 days and/or the seller has already reduced the original asking price. Even in a buyer’s market, sellers emotionally believe their home will sell quickly and at or around asking price. It can take the house sitting on the market for a month before they realize they’re going to have to rethink things if they want to sell.

In a buyer’s market, you may also be able to include contingencies, allowances and/or seller-paid closing costs requests that otherwise may soften the deal. Contingencies are common, but as opposed to a seller’s market where certain contingencies can kill a deal, they are less likely to cause a problem in a buyer’s market. Allowances are also fair game, enabling you to get some credit for certain cosmetic imperfections, such as carpeting or paint. Closing costs can add up to 2 percent of the sales price, making them a negotiating point as well.

Home sellers who are anxious to sell are more likely to be willing to consider any reasonable deal than to have no deal at all. This isn’t to say all sellers in a buyer’s market are inclined to sell at rock-bottom prices or be agreeable to particular terms. Selling a home is frequently an emotional decision and most home buyers believe their homes are worth a certain amount. A low-ball offer can offend any home seller and you can’t assume they’re desperate to sell.

Even with the most motivated sellers, if you want to close quicker and ensure your offer is the only one the seller considers, make it an offer they can’t refuse. Remove as many contingencies as possible, get preapproved for a mortgage or better yet, offer all cash to remove any financial barriers. All-cash offers are a great way to incentivize home sellers to lower their asking price even further, because you’re removing risk, stress and hassle for them.

One of the other advantages of a buyer’s market is that you may be able to take a bit more time in finding the just-right house. You aren’t as pressured to make an offer on the spot in fear that another buyer is on the doorstep. Don’t get too comfortable, however. If the house, neighborhood and location are highly desirable, other buyers are sure to be near.

One final note: because there are more houses on the market, a seller’s market can signal it’s a great time to find a diamond in the rough. Even in a buyer’s market, the most attractive, updated homes will still get the most attention and potentially put you in a bidding war. The homes that need more TLC may be left in the dust, giving you the perfect opportunity to make a great investment, particularly if the home is in a desirable neighborhood. Be sure you get a thorough, independent inspection and consider bringing in a contractor and/or interior designer to help you determine the cost of any repairs and updates. You can negotiate with the seller on the repairs, but you may still need to pay for some of them out of pocket.

A Seller’s Market

A seller’s market is defined as a market condition characterized by a shortage of goods available for sale, resulting in pricing power for the seller. In terms of real estate, a seller’s market means there are more active buyers than there are sellers, enabling sellers to price their homes at top dollar because they know their home is in high demand.

In a seller’s market, buyers must be competitive with their offers. The more attractive you can make your offer, the better chance you will have of winning a bidding war. This means the fewer contingencies the better and you may need to forego any allowances or closing cost requests. The goal is to make your offer as effortless and risk-free as possible, especially when compared to other offers.

A piece of advice you will likely hear often is to get your financials in order before you begin the home search. No matter the type of market or how you plan to finance the new home, you will need certain documents and that can take time. In a seller’s market, timing is everything and you don’t want to hold up your offer because you’re gathering financial documents and then waiting on a lender to give you a mortgage pre-approval letter.

You can make an offer with a financing contingency, but most sellers worry about these because you may be unable to get approved for a mortgage. If you have an existing home to sell, you’ll also need to include a home sale contingency in your offer. Most homebuyers need to have an accepted offer on their existing home before getting approved for a mortgage, otherwise, they’ll exceed the debt-to-income requirement. This can get sticky. If your existing home takes a while to sell, your contingency, if accepted by the seller, may expire and you lose the new house. If your existing home sells quickly, you’re in a better position to get pre-approved for financing, but you may also need to move twice if you don’t close on the new house before or at the same time as you close on the sale of your existing home. It’s a stressful timing game that doesn’t typically end where you want it.

All-cash offers, on the other hand, tell the seller you have the money and are ready to move forward. The seller won’t have to worry about you selling your existing home first or getting financing. In essence, they won’t have to wait – and neither will you. Today in most markets it’s a seller’s market and sellers want low-risk offers. Keep in mind that since there are fewer homes on the market in a seller’s market, the nicest homes will go quickly. The sweeter you make your deal, the more likely you are to beat the other bidders.

Check out Homeward to learn more about securing cash to make an all-cash offer on a home. It’s a different way to think about buying real estate, but it’s proving effective for thousands of people who want to avoid the many issues that plague traditional real estate transactions. No matter what type of market you are in, you can reduce the time it takes to purchase a home and do it with significantly less stress if you consider new options like Homeward.

Your old home seems too cramped, and you’ve been surfing local listings. You’re imagining moving into something bigger, different, or closer to hot spots…but if your cash is tied up in your current home, where’s your down payment money coming from? When you don’t have tens of thousands of spare dollars sitting around, what are your options for finding new home funds?

It may sound tricky to come up with a decent sum of cash. However, options like using the equity in your current home, 401k savings, credit unions, or companies like Homeward make it possible for you to snatch your perfect home off the market before selling your current one.  

HELOC (Home Equity Line of Credit)

A Home Equity Line of Credit, or HELOC, allows you to borrow against the equity you have in your current home. It essentially acts like a credit card that’s linked to your home equity, and the line of credit is secured by your home. HELOCs typically have a period of 5 to 10 years where you can draw funds, and repayment periods vary, but can extend up to 20 years.

HELOCs usually have lower interest rates because your existing home is the collateral. And with this loan type, there are often no closing costs, and the interest you pay is tax deductible if you’re using the funds to buy, build, or improve a home.

When you get a home equity loan for down payment on new home, you can create the 20 percent down payment you need for a strong offer and avoid having to pay Private Mortgage Insurance (PMI). Additionally, with a larger down payment, the loan for your new home’s mortgage could be smaller.

The goal with a HELOC is to use the funds to secure your new home, sell your existing home, then use the sale proceeds to pay off the HELOC in full. However, if you default on your payments, the lender can foreclose on your current home. Plus, if you have a HELOC loan with prepayment penalties, you may pay fees for paying the loan off in full. Some loans also have variable interest rates, which can cause you to pay more overall.  

Leveraging Your 401k

Taking funds from your retirement account is another way to secure the down payment for your new home. You gain a lump sum without having to sell your existing home, and you have two borrowing options: a distribution and a 401k loan.

With a traditional 401k distribution, you pay the early withdrawal penalty of 10 percent plus taxes on the total amount, and whatever is left over is your down payment. Those with Roth IRAs can withdraw contributions whenever they’d like without paying penalties, though.

If you use a 401k loan, you can borrow up to 50 percent of your total 401k balance or $50,000 (whichever is less), then pay it back with interest. But if you quit or lose your job the entire loan amount becomes due by the next Federal tax filing date. And missing payments can mean the 401k loan switches to a 401k distribution. If this switch happens, you’ll be on the hook for paying the 10 percent penalty plus any taxes.

Borrowing down payment money from your 401k account can work for some homebuyers. Yet, you’re still taking the funds from your future retirement, typically having to pay fees and interest, and needing to pay it back in order to retire.

Securing a Loan From a Local Credit Union

Homebuyers who are already credit union members, with good credit scores and low income-to-debt ratios, may want to consider a loan with their local credit union. Credit unions may have better rates and loan types than large banks, and they’re usually more flexible.

You’ll need to pay origination fees, but some buyers may be able to negotiate good terms like no prepayment penalties. Because you’re in the process of buying a new home and selling an existing one, credit unions might be able to provide favorable bridge loans or similar products to help with your new home transaction. However, getting another loan may affect your credit history and impact your ability to get a good mortgage for a new home.

Using a Service like Homeward

Instead of getting financing for only your down payment, you could go with an option like Homeward that covers the entire new home purchase without having to sell your existing home first. With a pre-approval letter from a lender in addition to Homeward’s approval, you’re able to go house hunting with Homeward’s funds.

When you’re ready to make an offer on a new home, Homeward and your agent work together to present the offer as all cash to the seller on your behalf. And if it’s accepted, you agree to leaseback and repurchasing terms with Homeward, and can move into your new home then start prepping your existing home to sell.

When you’re current home is sold, you obtain a conventional mortgage to buy back your new home from Homeward. With this kind of service, you can move into your ideal new home, have time to prep your current home for sale, and then sell your existing home for full market value.

Traditional Financing Doesn’t Work For All Homebuyers

Regular routes don’t always work for your specific financial situation, especially if you need the equity in your existing home for a new one. Because many homebuyers don’t have enough free-flowing cash for huge down payments without selling their current home, alternative financing may be the path that works best. If you’re able to use a service like Homeward, or use home equity to purchase new home, 401k, or credit union loan, you can easily bridge the buying and selling transactions between your new and old homes.

‍

Interested in learning more about how Homeward can help you purchase your dream home? Check out how Homeward works, or call 512-956-5087.

Owning a home is a wonderful thing. But when you’re hunting for a new home, owning a home can make an already stressful process even more difficult. 

If you’ve owned your current home for some time, the odds are that a good portion of your net worth is tied up. How will you access that equity to help fund your new home? How can you get the cash for a down payment? How will you compete with other homebuyers in your area?

These are questions and challenges that many homebuyers face. If this situation sounds like yours, you may have already had well-meaning friends or relatives suggest a bridge loan as an option. Let’s look at bridge loans in detail to help you understand if a bridge loan is the best fit for your homebuying situation. 

‍

What is a bridge loan and how does it work?

Bridge loans are a short-term financing solution that provides immediate cash for homebuyers. Bridge loans usually are taken out for a period of six to twelve months and can be finalized faster than a conventional mortgage. 

Bridge loans get their name because they’re meant as a temporary “bridge” to give you access to cash when you need it but don’t yet have it. In real estate, that’s typically referring to the time between buying a new house and selling your old home.

Here’s an example: You just got a job on the other side of the city. You’ve owned your current home for ten years, but you want to move across town to avoid a long commute. Your home is worth $400,000, and you currently owe $225,000 on your mortgage, meaning you have $125,000 in equity. 

You need cash for a down payment on your new home, but your equity is locked up in your old home. Bridge loan terms and details vary, but there are two common scenarios:

• You take out a bridge loan for the difference between your mortgage balance ($225,000) and 80% of your home’s value ($320,000). In this case, that would be $95,000. You use that money as a down payment on your new home. You’d then sell your old home, using the money to pay off the old mortgage and the bridge loan.
• You take out a bridge loan for 80% of your home’s value ($320,000). You use that money to pay off your current mortgage ($275,000), leaving you with just a $95,000 bridge loan. You use the balance as a down payment on your new home. After selling your old home, you pay off the balance of the bridge loan. 

Whichever scenario your lender offers, the whole point is that the bridge loan gives you immediate cash to move forward with purchasing your new home. There’s a lot of value in this, but you should consider the risks before agreeing to a bridge loan.

‍

Pros and cons of using a bridge loan

There are plenty of good reasons homebuyers turn to bridge loans. Bridge loans exist because they enable you to buy a new home before selling your old home. But let’s look at some specific benefits related to this foundational one:

• You’re able to access your equity. Bridge loans give you a way of accessing the equity in your old home, enabling you to put a solid down payment on your new home. It takes a long time to save for a down payment if you only save a little each month. Bridge loans are a much faster solution. 
• You’re able to buy your new home before selling your old home. Buying before selling is far less disruptive. It means you can avoid a temporary rental or the need to move twice. It also allows you to prep and show your old home to potential buyers with relative ease whenever you're ready.
• You can avoid a home sale contingency. A home sale contingency is when your offer to purchase a new home is conditional on selling your old home. Sellers don’t like contingencies. A home sale contingency can make buying a new home significantly harder, especially in a hot real estate market.

All of that sounds great. But as with most things in life, bridge loans come with a catch. Before agreeing to a bridge loan, recognize that they also come with a number of cons:

• Higher interest rates and fees. Bridge loans are short-term loans. They’re riskier for lenders than conventional mortgages. These two factors mean lenders need to charge higher interest rates and fees to make bridge loans worth their time. Bridge loan interest rates vary and can be as high as 10%, significantly higher than the average conventional mortgage. 
• Multiple mortgages create increased risk. Although it’s often only for a short period, using a bridge loan means you’ll effectively have two or three mortgages at once (your old mortgage, your new mortgage, and the bridge loan itself). If something goes wrong—like your old home taking time to sell— you could find yourself in a tough spot. 
• Hard to find and qualify for. A bridge loan isn’t even an option if you don’t have at least 20% equity in your home. Bridge loans also aren’t offered by as many lenders, meaning it can be hard to find one that works for you. On top of that, lenders require excellent credit and high-income levels since bridge loans effectively mean you’ll be holding multiple mortgages at once.

Bridge loans have their place in the real estate market, but they can be risky for the average homebuyer. They’re typically a good fit for individuals with high income and low debt levels.

‍

A better alternative to bridge loans

“As a realtor, I never thought bridge loans were a great option for the average homebuyer,” says Tim Heyl, Homeward’s founder and CEO. “The Homeward Cash Offer brings virtually all the benefits of a bridge loan with significantly less risk. It’s a better fit for most homebuyers.”

Buying a home while selling your old one brings very real challenges. When you choose to use the Homeward Cash Offer, we’ll buy the home you want with cash. You can move in right away and rent it from us while your new mortgage gets finalized and you sell your old home. 

That means no home sale contingency (or finance or appraisal contingencies) and no disruptive experience of selling your old home while still living in it. No juggling two or three mortgage payments at the same time. No high or variable interest rates. You’ll come to the table with a cash offer, meaning you’ll have a four times greater chance of getting the home you love. 

‍Schedule an appointment with a Homeward Advisor today if you're ready to learn more about using the Homeward Cash Offer as a better way to buy before you sell.

3 Pieces of Advice When Making an Offer on A House

Buying a home is an exciting milestone, an investment, and often, a major stressor. The fun part is looking for a new home. The stress comes in when you are ready to make an offer. How much do you offer? What terms do you want to negotiate? How do you make sure you’re protected? Do you need to sell your existing home first?

The good news is buying and selling property can be easier and less stressful than you think. You just need to know a few ways to make sure your offer is one that will put you in the best position. Here are three pieces of advice that will save you money, risk and headaches.

Get It In Writing

When you’re searching for a home, you may know the homeowner already or have the opportunity to meet them. Your real estate agent may also have spoken with them or their agent about certain items relating to an offer. In these situations, it’s not uncommon for terms to be discussed. Maybe they tell you they will lower the price by a certain number if you agree to close by a certain date or make an all-cash offer. Or, maybe something is discussed about appliances conveying with the house. While these conversations are completely acceptable, they aren’t enough.

Oral agreements and promises are not legally binding in real estate transactions. Anything you think was agreed to in a conversation, over email or any other form of communication should be included in your offer. Your written offer is the only legally-binding agreement and if your terms are not in there, they aren’t considered legitimate. If for some reason the seller backtracks on anything they agreed to in conversation, they have the right to decline all or part of your written offer or negotiate those terms. On the other hand, once they sign the written offer, all of the terms in your offer are now enforceable by law.

Use an Approved Offer Document

Whether you enlist the help of a licensed real estate agent or not, your offer needs to conform to state and local laws. You can’t simply send an email or write up your own offer. Your agent will have this document as standard fare, but if you decide not to use an agent, you can find plenty of templates online. No matter which route you take, the document will detail what you’re offering to pay, plus any contingencies and terms. Remember, if you’ve negotiated anything with the seller, you’ll want to include those stipulations as well.

Consider Making an All-Cash Offer

One of the best ways to win a bid on a house is to offer cash. All-cash offers are more attractive to home sellers because they come with less risk and close much faster than offers tied to a mortgage. Most mortgage-backed offers come with the contingency that the home buyer must secure financing before they will actually purchase the home. The home seller has to wait for the approval process and hope there are no issues, otherwise, they have to start over and put their home back on the market. Because there are no mortgage contingencies or bank approvals to deal with, all-cash offers close faster, often within a couple of weeks or less – that means fewer showings, fewer potential issues and faster moves.

Not everyone has cash readily accessible to make an all-cash offer. In these situations, your best bet is to use someone else’s cash. Homeward, for instance, is a company that offers clients access to their capital to make an all-cash offer on a house. You pay a 1.9 percent fee to do so (which is rolled into the purchase price of your home), but then you can save up to 5 percent because sellers are often willing to lower their asking price when they receive an all-cash offer. How do we do this? We evaluate your existing home during our approval process and give you credit for your home equity in advance. It’s a great way to not only make an attractive offer on a house but to be able to make that offer before you sell your existing home.

What’s in the Offer?

Now that you’re ready to make an offer, let’s go over exactly what needs to be in your offer. According to Realtor.com, when your purchase offer is accepted, it becomes a binding sales contract, so it’s important to have the following items in your offer:

• Address and legal description of property
• Sale price
• Terms (is it an all-cash offer or contingent upon mortgage approval?)
• Seller’s promise to provide clear title
• Target closing date
• Earnest money deposit and type of payment
• Method by which taxes and utility bills are to be adjusted between parties
• Provisions about who pays for title insurance, survey, etc.
• Type of deed that will be granted
• Any state requirements
• An offer time limit
• All contingencies

Price

When it comes to real estate transactions, the first thing most people think about is the price. How do you make a fair offer? If you offer too low, you can risk offending the seller. If you offer too high, you may get the house but will have overspent. There is a sweet spot, but it’s not always easy to find.

If you work with a real estate agent, he or she will help you determine what price you should offer to pay, otherwise, you’ll have to determine it yourself. Either way, the go-to method is to look at comparables (a.k.a. “comps”). These are the prices of similar properties that have recently sold in your area. You may not be able to do a perfect apples-to-apples comparison since every property is unique, but you can at least look at:

• Age of home
• House square footage
• Price per square foot
• Number of bedrooms, bathrooms and living areas
• Property size
• Amenities (such as pool, office, 2-car garage or larger, etc.)
• Updates (particularly kitchen and master bathroom)

For instance, if a home was built in the 1980s and hasn’t been updated since, you can’t fairly price that home based on an updated, larger one. Try to find sold homes that are as close as possible to the home you want to buy. This isn’t perfect math. It’s getting to a number that is fair.

Contingencies

Contingencies are likely the next thing most people think about with their offer. Will you need financing? Will you need to sell your home first before you can buy? Do you want to be sure the home you want to buy passes inspection before you buy? All of these issues can be addressed with contingencies.

Contingencies need to be spelled out in your offer. The seller needs to know how you plan to pay and you need to know whether the home you’re making an offer on is in good condition. Yes, the seller is obligated to disclose any known issues with the home, such as roof damage, leaks or foundation issues, but only through a third-party inspection will you find out the extent of damages, needed repairs or items that are not up to code. The homeowner may not be aware of these issues, but you want to be sure you are.

While you may not want to bypass the inspection contingency, you can greatly improve your bargaining position if you can forego the home sale and mortgage financing contingencies. As stated earlier, these contingencies bring risk into the equation for the seller. All-cash offers are the best way to avoid both. Even if you get pre-approved for a mortgage, you’ll still want to keep the mortgage contingency in your contract because you might not ultimately qualify for, and get, your mortgage financing. For example, if you lose your job or your credit changes before your new home sale closes, the mortgage company may deny your application.

With these tips in hand, you’ll be ready to make an offer on a house and hopefully even enjoy the process.

Types of Mortgage Loans

Buying a new home before you’ve sold your current home may be out of the question if you can’t come up with the required down payment. Forking over the typical 20 percent down payment can be cost-prohibitive for many home buyers, particularly if you’re already paying a mortgage on your existing home. Lenders require your debt-to-income ratio to be below a certain level and trying to hold two loans at once could push you above the limit.

One big myth is that mortgage lenders always require a 20 percent down payment. Not true. In fact, most conventional mortgage loans do not require you to put 20 percent down. The minimum down payment depends on the lender and loan type. According to Zacks, conventional mortgage lenders now require as little as 5 percent down. But that 5 percent down payment comes with some caveats.

First, the lender will require you to pay private mortgage insurance (PMI) if your loan amount is over 80 percent of the value of the new home you’re buying. This protects the lender if you default on the loan. PMI costs between 0.50% – 1.00% of the loan amount on an annual basis. Once the loan amount is paid down and falls below 80 percent of the property value, you’ll no longer have to pay this. Note that for low down payment loans, a lender will also want to see a healthy credit score, a steady income, a consistent employment history, and a debt-to-income ratio of less than 50 percent.

You could also consider an FHA mortgage loan. The FHA site breaks down the different loan options, each with their own requirements. There are first-time home buyer loans, Gift of Equity loans (a special FHA program for borrowers who have family members helping with the down payment), mobile home loans, investment property loans, and vacation home loans. Even though the typical FHA loans require a minimum 3.5 percent down payment, for second home purchases, it says, “Buyers will typically be required to make at least a 10-20 percent down payment for their home purchases.”

An FHA loan also requires you to obtain mortgage insurance. You will have to pay two mortgage insurance costs in this situation. The first is an upfront mortgage insurance premium of 1.75 percent of the loan balance. The second is the monthly mortgage insurance premium, which is 0.85 percent of the total loan amount on an annualized basis. This is paid until the loan is fully paid off or refinanced, even if the loan balance drops below 80 percent of the home’s value.

A No Down-Payment Option

For many buyers, the conventional low down-payment options, including FHA loans, are unattractive. Many want a less-restrictive alternative with lower fees, less paperwork, and more flexible qualifying requirements. If this applies to you, then buying your next home with no down payment is the way to go.

But how do you buy a new home with no down payment when every lender requires at least some upfront investment? Easy! You bypass the mortgage loan altogether, at least at first. We’ll explain how.

A new option is giving home buyers reason to be optimistic. Today, homeowners can buy a new home without a down payment by paying for the home with cash instead of financing it. I know what you’re thinking, “But I don’t have enough money to make an all-cash offer!” Maybe not, but now at least one company is allowing home buyers to use their cash to make the purchase. Homeward has access to funds that it lets you use to make an all-cash offer on your next home. It’s not a loan and doesn’t incur interest like a typical loan would.

How a No Down-Payment Option Works

With a no down-payment option, you first need to get approved for the Homeward program. You can get approved by answering some questions and submitting some information related to your current home and the home you want to purchase if you’ve found it already. Once approved, you can make an all-cash offer for any home within your approved budget. Because an all-cash offer eliminates the need for the common appraisal, financing and home sale contingencies, you can close on your new home in as little as 10 days. You can also save up to 5 percent on your purchase price by making an all-cash offer. All-cash offers are more attractive to home sellers because there is much less risk the deal will fall through.

You then lease your newly-purchased home from Homeward for up to six months while you take the time to sell your existing property for maximum value. This is a huge benefit for you, giving you the flexibility to move when you’re ready:

1. If you want to avoid moving twice, a common annoyance, then you can wait until you’ve secured your new home before selling the one you have.
2. If you are trying to reduce the amount of money you pay each month, you can list your current home immediately to sell it as quickly as possible.
3. If you want to avoid showings, you can move into your new home as soon as it closes.
4. If you want to stay in your existing home while you remodel or repair your new one, you have that option and can avoid the hassle of living through messy renovations.

Once you close on the sale of your existing home, you simply obtain a new mortgage and buy your new home back from Homeward. You can use the proceeds from the sale of your first home to make a down payment on your second home. The leaseback payments cease and the new mortgage payments commence as you are now the proud owner of your new home.

This streamlined system removes the lengthy sales process, saves you money, and eliminates the need for an initial down payment. It’s also much less stressful and uncertain as you are much more in control of each step. It is an attractive option for many home buyers stuck in the familiar predicament of wanting to buy a new home but needing to sell their current one in order to afford it.

What You Need to Know About Buying and Selling a House at the Same Time

In a perfect world, real estate deals would be timed perfectly, enabling a buyer to sell their existing property just as they purchase a new property. This would prevent the hassles and stress that plague so many of these transactions. Hassles like selling too soon and having to pack up and move twice. Stresses like selling too slowly and having to decide between losing a dream home or carrying two mortgages at the same time.

For people who want to know how to time it right to sell and buy a house at the same time, here’s the bad news: you probably can’t. There are just too many variables at play that can’t be controlled by the buyer or the seller.

On a broader scale, the local housing market will dictate how quickly the existing property may sell and how much pressure there is to purchase a new property as quickly as possible before another buyer makes an offer. Then, there are the many factors that impact both sides of the transaction, making a seemingly simple process quite complicated. After all, a buyer who needs to tap into their home equity to cover their down payment, or who can’t qualify for two mortgages at once, must sell their existing home in order to purchase their next one. Other variables that can delay a purchase or sale include the condition of both of the properties and what their inspections uncover, the property appraisals, and title issues.

If any one of these variables causes a delay, a rescinded offer or nullified contract, both your new home purchase and your existing home sale are in jeopardy. Trulia found the rate of real estate transaction failures is climbing, rising from 2.1 percent to 3.9 percent in just one year. The cause? Those pesky variables that ruin the party. Even the most desirable properties aren’t a slam dunk. Things happen and deals fall through, making selling and buying a house at the same time elusive.

The good news is there are options. Buyers don’t have to hold their breath and cross their fingers in hopes that the timing goes perfectly.

3 Steps for Buying and Selling a House at the Same Time

The chances of you selling and buying a house at the same time are rather slim. But, there are definitely things you can do to close the gap between those transactions or at least reduce the stress associated with them. The key is to plan ahead. One of the biggest mistakes people make is to throw their house on the market without really being ready or searching for a home without any real plan on how they’ll sell their existing one. Here are the 3 steps you should follow to make real estate transactions as smooth and hassle-free as possible.

Step 1: Get Ready

Before you do anything, get your existing property in order. That means cleaning out, decluttering and updating as much as your budget will afford. Get rid of anything that doesn’t absolutely have to be there. The goal is to enable your prospective buyers to envision their own things in your house. If it’s packed with personal belongings, bulky furniture, odd furniture arrangements, or items that only clutter, your home will seem smaller with fewer possibilities.

Similarly, you want to put your home in its best light. Make modest investments into high-return projects, particularly in the kitchen and master bath. This may involve simple projects like modernizing light fixtures, faucets, cabinet hardware and shower curtains. Or, it can mean going a step further to replace old countertops, redo landscaping or give your home a fresh coat of paint.

While buyers consider these cosmetic investments a nice-to-have, a home without any major inspection issues is a must-have. Unexpected issues found in home inspections are notorious for delaying real estate deals or making them fall through. Go ahead and get your home pre-inspected after you’ve given it some elbow grease. A pre-inspection will remove any surprises later on when you have an offer on the table and give you a chance to make repairs now.

Finally, do your homework. Know the housing market where you want to buy, pinpoint the neighborhoods where you want to search, and run the numbers so you know a realistic price range you can afford. You can hire a real estate agent to help or do it yourself if you know where to look, like the MLS. Determine your must-haves and deal-breakers so you can narrow your search and save time. You want to be ready to make an offer quickly in case you get a solid offer on your existing home.

Step 2: Secure Financing Ahead of Time

Securing financing can take time. You can often get preapproved for a mortgage before you even start looking for another house. A preapproval sweetens your offer, showing the seller you are serious and are likely to secure financing. It also speeds up the process so you aren’t waiting on a lender to approve you once you’ve made an offer.

For an even faster route, consider getting approved by Homeward. Unlike a traditional lender, Homeward values your existing property during their approval process and uses their cash to buy your new home before you sell your old one. That means you can make an all-cash offer, eliminating the need for appraisal, financing or home sale contingencies. It closes faster and reduces costs. All you pay is a 1.9 percent fee that can be rolled into the purchase of the new home. You can buy your next home and take your time selling your old one if needed. It may not always be as cheap as selling and buying a house at the same time, but it removes the hassle and stress out of the transaction so you can relax. Your all-cash offer may also help you get a discount from the seller or win your dream home.

Step 3: Be Prepared to Negotiate

One of the definitions of “deal” is “an arrangement for mutual advantage.” A real estate deal is just that – both parties engage in an arrangement that provides benefits for each. You may have to give a little to get a little. That’s the nature of negotiations. If you find a house you love, you may want to consider reducing the asking price for your existing home to attract more buyers. Of course, if you use Homeward, you can take your time selling it and ask for the highest price you think you can get.

Other things you may need to negotiate are repairs on your home and the home you want to buy. Even with a pre-inspection, your buyers may request certain repairs you didn’t already make. You’re also dealing with the inspection report for the house you want to buy. Not every issue found on the inspection report has to be repaired by the owner. Hopefully, most are inexpensive repairs that won’t delay the deal. But, if larger problems are found, you may need to start negotiating. You or your seller may be willing to reduce the asking price to cover the cost of a repair rather than making the repairs before closing, which can delay the transaction. Be smart. Digging in your heels over a $2,000 repair may result in the deal falling through, costing you much more in the long run.

While you may not be able to time the sale and purchase of your existing and new homes at precisely the same time, you can make the gap more tolerable. By following the steps above, you will be ready to make and receive an offer with minimal delays. Plan ahead and do everything you can before you jump into the real estate market. Your preparation will be rewarded with smoother transactions.

Maybe your family has grown. Maybe you’re relocating for a new job. Maybe you’ve just found your dream home. Whatever the case, if you own a home and need to buy a new one, you’re faced with a common dilemma: What should you do first? Is it better to sell your old home or buy your new home first? 

Conventional wisdom has been that you should always sell your old home first, mostly to eliminate the possibility of getting stuck paying two mortgages. But does that still apply? “While it still makes sense for some homebuyers to sell their old home before buying a new one, that’s rarely the case today,” says Brian Gubernick, Homeward’s Chief Real Estate Officer. “Today’s homebuyers have more options at their disposal, and they need to carefully consider which option best fits their personal situation.”

Let’s look at the pros and cons of buying before you sell, along with the different options that allow you to do that.

‍

Benefits to buying before selling

There are several great reasons to consider buying your new home before selling your old home:

• It’s a seller’s market and you need to move fast. A seller’s market is when the demand for homes is greater than the supply of homes available for sale. Since demand is high, a seller’s market means you have to move quickly to get the home you want. A home sale contingency in your offer may spook the seller or delay the closing so that’s not an option. It’s also important to note that waiting to sell your old home until after you’ve purchased your new home is less risky in a seller’s market. 
• It’s your dream home. You don’t want to miss out on the home of your dreams. If you’ve found the perfect home for you, you need to make an offer ASAP. 
• It’s less disruptive. Trying to sell the home you’re living in is challenging. You need to stage it, keep it clean, and leave the house anytime a showing gets scheduled. This is especially hard if you have children and/or pets. If you buy before you sell, all these problems disappear. You can move out before you list the home, get it ready, and skip the showings and open houses.
• You can avoid moving twice. If you sell and then buy, you may be stuck moving out of your old home on the buyer’s timeline. For many people, this entails the added expense and inconvenience of putting your stuff in storage and living in temporary housing.

‍

Cons to buying before selling

While those are compelling reasons to consider alternatives to the traditional transaction, buying before selling may not always make sense. Depending on how you do it, buying before selling can involve some additional risks and stressors:

• It can be expensive. One of the greatest risks to buying before selling is that you may end up with two mortgages if your old home takes time to sell. That can be expensive and isn’t doable for most people.
• It can make getting mortgage approval harder. If your mortgage lender knows you plan to buy a new home before selling your current home, they will want to confirm that you can cover all expenses for both homes. This likely means needing to prove you have a sufficient debt-to-income ratio, and it could mean higher interest rates. 
• You may feel pressured to sell quickly. For all of the reasons mentioned above, buying before selling can put pressure on you to sell your old home quickly. That may mean you’re tempted to reduce the price to increase the odds of a fast sale. 

‍

Ways to buy before selling

Buying before selling can include some risks. But for many homebuyers, the pros outweigh the cons. If you’re one of those people, there’s good news: You’ve got a lot of options available to you. There are several different ways you can buy a new home before selling your old home, including:

• Making a contingent offer
• Using a bridge loan
• Using a home equity loan
• Making a cash offer

‍

Making a contingent offer

Home sale contingencies are relatively common. When you make an offer with a home sale contingency, you’re making your purchase of the new home conditional on your ability to successfully sell your existing home within a period of time. If you can’t sell your old home, then your offer on your new home becomes void. You can walk away and recoup your earnest money deposit.

While that might sound great for you as a homebuyer, sellers don’t like contingent offers. Accepting your contingent offer introduces uncertainty into the transaction, and sellers want certainty. This means that if a seller has multiple offers for their home, you can virtually count on your contingent offer falling to the bottom of the pile. 

‍

Using a bridge loan

Bridge loans are short-term loans that can enable you to buy a new home before selling your old home. When you take out a bridge loan, you use your existing home as collateral to secure a short-term loan. You typically use this loan for a down payment on a new home or to make payments on your existing home. Terms on bridge loans vary widely, but they’re typically designed for repayment within six months to three years. 

Here’s the problem with bridge loans: they’re expensive. Due to their short-term nature, bridge loans typically carry much higher interest rates and origination costs than conventional mortgages. Because it’s a separate loan, a bridge loan also comes with its own fees and terms. 

While bridge loans can work in some situations, they’re costly and risky. The worst-case scenario is that you could end up with three payments: your old mortgage, your new mortgage, and your bridge loan payment.

‍

Using a home equity loan

If you own a $300,000 house and only have $100,000 left on your existing mortgage, that means you have $200,000 in equity in your home. Unfortunately, under normal circumstances, you can’t access that $200,000 until you’ve sold your home. 

Home equity loans change that. They give you a way to access your equity in your current home before you sell it. You can think of a home equity loan as a second mortgage on your existing home. That might sound just like a bridge loan, but home equity loans can be much longer-term, which means you’ll typically be able to secure a lower interest rate on a home equity loan.

Let’s continue with the example from above. Say you wanted to access some of that equity for a down payment on a new home. You talk to your lender, and they offer you a home equity loan of $100,000. If you accept the offer, you’d get that $100,000 in a lump sum and you’d start paying the lender back in monthly payments (just like with a mortgage).

You could then use that $100,000 as a down payment on your new home. If you then sold your old home for $300,000, you would use the proceeds to pay off your original mortgage and the home equity loan, leaving you with just your new mortgage.

‍

Making a cash offer

Making a cash offer is the ideal way to buy a new home. When you make a cash offer, you’re signaling to the seller that you bring less risk to the table and can close faster. The data shows that this is music to a seller’s ears: homebuyers with cash offers are more than four times as likely to win a bidding war. 

There are two primary ways to make cash offers on a home: Use your own cash or use a  program like The Homeward Cash Offer. “Cash offers used to be an option that was only available to the wealthy,” says Julie Youngblood, real estate coach and Homeward Partner Lead. “Today, thanks to solutions like The Homeward Cash Offer, average homebuyers have a way to make all-cash, contingency-free bids.” 

Using your own cash to buy a home is exactly what it sounds like. If you’re fortunate enough to have the money at your disposal, go for it. It’s simple and straightforward. Unfortunately, it’s also not an option for most people, especially since the average home price in the United States is more than $350,000.

The Homeward Cash Offer and our Buy before you sell solution have changed all that. Tim Heyl, Homeward’s CEO and Founder, created Buy before you sell to solve his clients’ real estate challenges. “I kept running into the same problem: buyers couldn’t make an offer on a new home until they sold their old home,” he explains. Heyl watched his buyers get stuck paying two mortgages, moving twice, or worse — missing out on a home they loved.  

"Buying a home should be fun and exciting, but many of my buyers were anxious," he remembers. "They felt rushed to make decisions and sometimes they made really bad ones."  The process is pretty straightforward. First Homeward buys the home you want with cash. Then, once you finalize your mortgage, you buy the home back from them. 

“I highly recommend it” Liz, a recent Homeward customer, describes her Buy before you sell home purchase this way: “We were able to buy our dream home with a cash offer, move into our dream home, and then sell our old home without worrying. Best experience ever, hands down.”

Get started

Buy before you sell offers a calmer, more convenient experience for homebuyers who also have a home to sell. If you're a homebuyer interested in learning more about buying before you sell, schedule an appointment with a Homeward Advisor. 

If you're an agent interested in turning contingent clients into cash buyers, schedule an appointment with a Homeward Advisor.