Connecticut is just one of the states in the U.S. that is experiencing a hot seller’s market. In fact, the market in this New England state is more competitive than it’s been in recent history. This is good news for sellers, but this market can be challenging for buyers of houses for sale in Westport, Connecticut. If you are in a situation where you want to buy Westport real estate, but you also need to sell the home you currently have, you could be in for a stressful experience. 

Fortunately, it doesn’t have to be that way. If you plan for each possible scenario when you are getting ready to buy and sell simultaneously, you can reduce stress and increase your chances of having successful transactions.

What Happens If You Sell Your Home Before You Find a New One?

In this strong seller’s market, you’ll likely sell your current home before you find homes for sale in Westport you want to buy. While this is usually a better financial scenario than buying a new home before you sell your current one, it still poses some challenges — the largest of which is where to live. Here are some options:

◾ Do a leaseback agreement. A leaseback agreement is when the new owner of your home agrees to rent it to you after closing. This works well when the buyer still needs to sell their own home, as it helps them pay for two mortgages. It is also more convenient for you, as you won’t have to move twice like would be necessary with other options. Keep in mind that a leaseback needs to be agreed upon before the home closes.

◾ Find a home to rent short-term. Another choice is to locate a home that you and your family can rent and live in while you continue searching for houses for sale in Westport. This takes the pressure off and allows you to be more discerning in your search than buying the first home you see. 

◾ Get a storage unit. Whether you are doing a leaseback, renting a home short-term, or staying with friends or family, securing a storage unit will help you keep clutter to a minimum and facilitate your ultimate move to be simple and streamlined.

What Happens If You Buy a New Home Before Selling Your Current One?

There are a few more obstacles involved in buying one of the new houses for sale in Westport before you sell the one you currently own. The biggest challenge is finding a way to make the down payment and pay for closing costs when you can’t access the equity in your primary residence. Though this can be tricky, it’s far from insurmountable when you consider the following options:

◾ Borrow from your 401(k). If you have a qualified retirement plan in the form of a 401(k), you can borrow from it if the type of plan you have allows for it. Talk with the administrator of your plan to see if this is an option for you and what the limits are on how much you can borrow.

◾ Do a cash-out refinance. Take advantage of the historically low-interest rates, and refinance your current home for more than what you owe with a cash-out refinance. This pays off your entire first mortgage, then takes out a second mortgage. You will get the difference in cash that you can then use to pay for closing costs and your down payment.

◾ Get a HELOC. A home equity line of credit is secured by your primary residence. It is a revolving line that you can borrow from to pay any costs associated with your new home purchase. With a HELOC, you can choose how much money you borrow and only have to pay interest on this amount.

In addition to having to come up with cash for a down payment and closing costs, you will also need to figure out how to make two mortgage payments until you can sell your current home. One of the ways to get around this is to rent your primary residence. You can either do this short-term until you are able to sell it, or you can turn it into a long-term rental and use it as an investment property. 

Another choice is to do a leaseback agreement with the seller of your new Westport real estate. If he or she has not yet found a new place to live, the new owner may be interested in renting their prior house from you, and this money can be used to pay the mortgage on the property.

Are You Financially Able to Buy and Sell Simultaneously?

Buying and selling Westport real estate is not inexpensive, and the costs can quickly add up if the timing does not go exactly as planned. To make sure you’re not getting into a situation you can’t afford, ask yourself the following:

◾ How long can I make two mortgage payments before my finances are negatively affected?

◾ Can I access the cash necessary for a down payment and other costs if I cannot access the equity in my current home?

◾ Will I be able to pay for moving costs if I cannot access the equity in my current home?

◾ Will borrowing from my 401(k) have a negative impact on my future retirement?

Asking yourself these questions and talking through your finances with your Westport real estate agent and financial planner will help you decide if you’re in a financial position that can withstand the simultaneous buying and selling process. If you find this will strain you financially, you may want to wait to buy until your home sells or hold off on the entire buying and selling process until you are in a better financial position.

Ready to move forward with your plans to buy and sell at the same time? Reach out to an experienced realtor like those at The Local Realtors for guidance.