Tuesday, April 28, 2015

How To Thrive When Your Bay Area Home Sells Out From Under You

Where do you go if you sell? Even though Sellers have regained positive equity in their homes and repaired past credit woes, it is still hard to sell when you don't know where you’ll land. Entering the competitive market as a buyer after you sell your departing residence is daunting. With a market moving this quickly, Sellers can risk losing their real estate foothold. Here are five strategies to help you thrive as you make your move:

1. Climb the real estate ladder. Buying up increases your chances for success as you bracket away from your competition. Typically, starter homes are the most competitive as they represent the first tier of affordability. Selling a starter home may bring two advantages. First, as you move up in price range, you leave behind some of the competition who can't afford to advance with you. Second, you may benefit from a large down-payment from liquidating your equity. (This is also true for those downsizing.) Your agent may be able to give you insight into how much equity your current home holds, how many offers are typical in each price range, and the relative heft of the over-bids.

2. Write your own ticket. Who invented the idea that you have to sell before you can buy your next home? Test the waters with creative contingencies. If you are afraid you will end up without a replacement home, make the sale of your current home contingent on identifying a replacement property. This is tricky and buyers will need some reassurance in the form of time frames. Ask your agent to talk it through with you.

3. Move to your dream location. If your dream is outside of the bay area, chances are you will be able to bring along a good financial cushion. We hate to lose our long-time locals, yet for some sellers, an out-of-area move may present a viable option. Your Berkeley Hills Realty agent can help refer you to a reputable agent outside the bay area boundaries.

4. Buy first, then sell. Bridge loans are back. Erick Berthaldan of MPR Financial said, "The ideal client for one of these loans is an individual who has a large amount of equity in their property and they are preparing to sell their departing residence. Most clients who obtain bridge loans hold them short-term and then refinance out of this loan once their departing residence is sold and they receive proceeds from the sale."

5. Beg, borrow, (but don't steal.) Hitting up your relatives can help in two ways. First, if you are fortunatley able to borrow the entire purchase price for a short term, you may be able to show proof of funds at the time your present your offer and compete alongside all-cash offers. Second, gift funds may help fortify your down-payment and help you qualify for the second mortgage needed to stay in place until you can sell your departing home. Aran Nafisi of RPM Mortgage said, "A common mistake we see buyers make is receiving gift funds from family and depositing them into their bank accounts. By doing this, it creates "large deposits" that appear in the buyers' bank statements. Banks will scrutinize these deposits and require the funds to be paper trailed to prove it is not a private loan. One strategy to lessen the paperwork is to ask the family member to wire the gift funds directly to the escrow company once the offer is accepted." 

Note of caution: If you plan to repay personal loans upon the sale of your departing property, act conservatively. This market is hot, but it can be spotty and it doesn't come with a guarantee. Similarly, if you plan to pay off debt by getting a loan after escrow closes using the collateral of your new home, be careful to talk to your accountant and lender. Your timing for getting the loan in place is important and may help ensure that the loan can still qualify as non-recourse purchase money.

Erick Berthaldan of MPR said it best, "It simply comes down to partnering up with the right real estate company and lender in order to be successful."

Erick Berthaldan of MPR Financial can be reached at 510-527-6146.
Aran Nafisi of RPM Mortgage can be reached at 925-743-3508.
You can find your Berkeley Hills Agent by clicking here.

No comments: