Buying or selling a property carries its own complexity — buying while selling can increase that complexity dramatically. Yet, with a little foresight and proper planning, it doesn't have to be so stressful. The Semple & Hettrich Team has been buying and selling deluxe Massachusetts-area estate at a record-breaking pace for ten years running. We've compiled our most useful tips for managing the process of buying and selling real estate at the same time.
Concurrent closing
Though our high net-worth clients are usually not dependent on the sale of one property in order to purchase another, they are not in the habit of allowing assets to remain unused for any longer than necessary. Several parties and institutions must work together efficiently and in the right sequence to accomplish concurrent closings. The buyer and seller of each property must transact with several financial institutions and county offices almost simultaneously; however, the key is to reduce the number of players involved.
Strictly speaking, a concurrent closing arranges for each step between purchase and sale to occur in the shortest time possible and with the fewest moving parts. What follows is the most common sequence of events that need to happen in the correct order to complete a concurrent closing in the shortest amount of time (typically one day, but two might be considered acceptable).
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A buyer purchases your property by wiring funds to the escrow company (and title company, if applicable — in which case, the title company will then pay off the remaining mortgage to release the title).
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Once the buyer's funds are confirmed received, the transfer of ownership is recorded at the county assessor's office.
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The escrow company automatically disperses funds for closing costs and delivers the remaining funds to you.
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As the buyer, you'll immediately send funds to the new property's escrow company (and title company, if applicable, to pay off the seller's mortgage).
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With the new title released, the deed is transferred to you and recorded in the relevant county assessor's office.
The key to eliminating delays between any of these steps, and the essence of concurrent closings, is to utilize the same financial entities whenever possible. This reduces the points of articulation in the process by as much as half — or even by a third if your seller is also engaged in a concurrent sale of their own (in which case, there is a repetition of the process above between steps four and five).
Planning is of the essence. Arrange a meeting with your buyer and seller (and your seller's buyer, if applicable), and explain the cost- and time-saving advantages of agreeing on one company to handle the transfer of escrow funds for each transaction (and one company to handle titles, if applicable). Your trusted real estate agent should be able to help you present your proposal and line up the institutions most adept at handling concurrent closings in your county. If the same Escrow Company handles both transactions, they can easily apply the funds of one transaction to the other. This saves everyone time, reduces fees, and eliminates the chance of conflicting processes.
Market alliances and timing
One major hurdle to simultaneous real estate transactions is the red tape involved with buying and selling in two different markets. This can literally double the number of rules and procedures you and your agent(s) will have to follow, depending on how dissimilar the regulations are. If you are currently considering your options, ask your real estate agent which areas have real estate procedures and codes that are similar to those in the market in which you’re selling. Also, ask them what other areas their agency has experience in. If neither of these questions results in favorable answers — or if you have your heart set on a particular place — you can ask them to recommend agencies and realtors they've worked with in the target market. This could be the seed of a powerful alliance to ease the difficulties of handling two different sets of market regulations simultaneously.
Besides different regulations, differing market conditions will also be a hurdle — but they could also just as easily be an advantage. In either case, you'll have much more leverage if time is on your side. For example, what if the property you want to purchase is only available when the property you want to sell is in a buyer's market? You'll have to decide if you want the other property enough to accept a loss on the sale of your current property. You could wait to sell your property, especially if your market shows signs of turning to your advantage, but then you risk losing out on the property you intend to buy — and what if it, too, is in a buyer's market and more likely to move out from under you? You'll want to keep your eye on the target market to gauge the odds of the target property remaining on the market while considering the alternate option below.
Since our clients commonly have multiple real estate investments, our first recommendation is to be more flexible about which properties one is willing to sell. For example, you might have a property in a more seller-friendly environment that you didn't originally plan to let go of but are more willing to sell than the one you won't accept a loss on. This flexibility with your portfolio would help you more quickly gain the needed liquidity to buy the property you've set your desires on. Selling property you didn't originally intend to sell can seem like a better idea if you had future visions of replacing it with something better down the line anyway, which you can easily do at your leisure once the original property experiences a seller's market.
There's nothing like an opportunity to encourage flexible thinking. It's hard to loosen your expectations as a seller when you have time pressures — but think of it as a thrilling opportunity to leverage unused parts of your portfolio.
Leveraging equity
The award-winning Semple & Hettrich Team specializes exclusively in high-end luxury properties for one of the nation's wealthiest states — but we are not out of touch with the realities that face sellers who only own one property and are reliant on it while purchasing anew.
An often overlooked option available to homeowners at almost any scale is to obtain a bridge loan; however, this short-term equity-lending tip is all the easier for those with more collateral. These are short-term loans that allow property owners to make buying decisions as though their current property's equity was available for a new purchase. Instead of giving access to equity in a house that hasn't sold, a bridge loan provides the owner with the same range of options by allowing them to use their property's equity as collateral for the loan with the understanding that the property is likely to sell promptly. These loans are typically much easier and faster to obtain than traditional mortgage loans, and if the home was originally mortgaged, terms are likely to be more favorable when obtained through the same bank that owns or owned the original mortgage.
Again, bridge loans do not free the equity of your current property, but they leverage it to the same effect. With a bridge loan in hand, one can immediately negotiate to purchase a new property, and this is a good move if the property they are trying to sell is currently in a seller's market. It's also much easier to sell a house that isn't being occupied because your realtor can take fuller advantage of it when vacant. By being able to move to your new destination more easily, the current property can be more professionally displayed on the market to promptly attract buyers and fetch a higher price.
Once the house used as collateral for the bridge loan is sold, the bank that issued the bridge loan is paid, and the title is released to the new buyer. It's a win-win-win situation. The only catch is that a bridge loan does not guarantee a quick sale, only an easier one. When done skillfully, though, a competent realtor will have no trouble leveraging the situation to dramatically speed the process up for everyone involved. If you have equity locked into a property and envision freeing it up for a quick purchase, ask your realtor if a bridge loan is right for you.
Using the same realtor for both transactions
Our last tip is as elegant as it is obvious: when possible, shop and sell properties that are managed by the same company or even the same realtor. This is especially possible for simultaneous purchases and sales occurring in the same county or nearby counties in which the realtor or realty company has a wealth of experience. This enables the realtor to reduce the fees associated with both transactions, which they are often happy to do because they are accomplishing two closings at the same time.
The overarching principle in every one of these tips is that the less complexity, the better. Simultaneously buying and selling real estate can invoke your problem-solving skills, but the rewards are worthwhile. To minimize problems, find the realtor with the greatest experience and service, and work with them to leverage as many in-house services as possible. For more great real estate tips like these, check out our other posts, specializing in Sudbury, Maynard, Lincoln, and Wayland, MA real estate, or contact The Semple & Hettrich Team to get started with your search today!
