There’s no disputing it. We are experiencing some of the lowest numbers of homes on the market ever in the Denver area. That makes for an incredibly competitive real estate market in which prices climb and homes move it at a record pace. Thank goodness we live in such an amazing place! Makes the short term pain of the house search worth it. 🙂
Experiencing an inventory crunch can be tough for home-buyers in the market. It can be especially tough for those who may be thinking about making a move to a new home. Those of us thinking about trading up or right-sizing or just wanting to be in a different location find ourselves in an unusual situation. We’re positioned to do well on a home sale – maximizing sale price and the equity built gained is almost a guarantee. But we also can feel stuck since it seems there are slim pickings in the Denver area real estate market. We don’t want to list our home and then not be able to find a replacement home that meets what we really want.
What if there were some other options for you? What if you didn’t have to list your home first, but could actually start looking for a replacement home right away. (Home sale contingencies can be tough to get accepted in a competitive situation as we all know)
Let’s look at a few options:
- Sell then Buy. Yes, I know I just mentioned that I wanted to talk about other possibilities. But I had to note a few things about this option first! This is the traditional route and can be a solid option if you want to make sure that you are able to get the price/proceeds you hope for or need for your replacement home purchase. If you absolutely must go this route (most do), the strongest way to submit an offer with a home sale contingency is to at least be through the inspection and appraisal contingencies on your home sale. That shows that your sale is less risky for the seller of the home you’re trying to buy (meaning, less likely to fall through). Of course, having the buyer’s (on your current home) loan fully approved would be icing on the cake.
- HELOC. HELOC is a Home Equity Line of Credit. Do you have enough equity in your current home where you could get a HELOC from your local bank or credit union and use that as a down payment on a home? Fees are typically low and they may allow a higher loan-to-value ratio, even up to 90% without an appraisal.
- Bridge Loan. This is a short term loan product that is more expensive in origination fees but is possible to get while your home is listed. This loan will be taken against the equity in your home and can be used as a downpayment on your future home. Just like the HELOC, this would be paid off with the sale of your current home.
- Gifts and Co-Signers. It’s not just family that can provide a gift for a downpayment. You could have a close friend, an employer, or even a charitable organization gift that to you. Having a co-signer may also be helpful with making the DTI ratios work. Let me know if you’d like to be connected with a solid local lender that can help with the few previous options mentioned!
- Cash purchase. Just like the above options with the HELOC and Bridge Loan, you’ll have to be able to qualify carrying your current mortgage and the mortgage on your new home to make it work. If it’s something you’re able to do, let’s talk about a new program that allows you to secure your replacement home with a new cash purchase option before listing and closing on your current home. It would look something like this:
- You find a replacement home (my team and I help you do that of course!)
- You submit a cash offer through the program and close on that replacement home in a few weeks or sooner (amazing!)
- You then list your home while simultaneously finishing the loan processing through the program
- You then close on your listed home, close loan with the mortgage company, then move into your new home
If this is something that interests you, let’s chat about it!
I hope I’ve given you some food for thought as you possibly consider making that next move for a new home! Remember that starting the conversation with a local lender early on in your planning is critical in my opinion. Also, my team and I are happy to start talking about strategies for your next home change. Maybe one of the options above or a variation of it could work well for you. There’s never been a better time to secure a mortgage (lower interest rates ever). There’s also never been a better time to sell a home (lowest inventory ever). Lots to talk about, so reach out to us today.
If you’d like to see some of the latest market trends in the Denver metro area, take a look at our most recent report here. By the way, we’ll be hosting a Denver and Colorado Economic Update webinar on Thursday evening 4 March. More details to come soon!