Home Buying Strategies

Below you will find a helpful list of home buying strategies and the associated advantages and disadvantages.

 
Strategy
Advantages
Disadvantages
1
Buy a replacement home first.
You know where you´ll be moving and how much you´ll be paying.
You don´t know how much you´ll net from the sale of your home, or how long it´ll take to sell. Owning two homes is a possibility. Qualifying for a mortgage may be difficult. Requires liquid cash for down payment.
2
Buy a replacement home first with a contingency for the sale of your current home.
Same as above, but you minimize many of the risks.
Many sellers won´t accept contingent sale offers. The best homes sell without this contingency. Poor bargaining position.
3
Buy a replacement home first using a swing loan (interim financing) for the down payment.
Same as #1. Enables you to compete against non-contingent sale buyers because you can buy without having your home sold.
High financial risk, especially if your home takes a long time to sell and/or sells low. High carrying costs. Qualifying for financing is more difficult. Swing loans are often due in six months.
4
Buy a replacement home first using a line of credit secured on your current home for the down payment.
Same as #1 and #3
Less financial risk than #3 because credit lines usually don´t have a short due date. High carrying costs. Some lenders don´t permit the use of a line of credit for home purchase.
5
Buy replacement home first with an employee buy-out (for transferees), or a new home where the builder will take your home in trade.
Same as #1
You´ll probably have to discount the price of your home in exchange for turning the risks of sale over to someone else.
6
Sell current home first.
You know how much cash you´ll net from the sale. Eliminates financial risk.
You may have to go to an interim rental if you can´t find a replacement home to buy in time.
7
Sell current home first with a contingency to find a replacement home.
Same as #6. You don´t have to move if you don´t find a replacement home.
Few buyers will accept this contingency. You may have to discount your price.
8
Sell current home first with a long closing and/or a rent-back option.
Same as #6. Reduced chance of having to move to an interim rental.
Buyers who need a quick close and possession won´t be able to accommodate you.



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