Figuring out the timing of selling an existing home and signing the contract on a new construction home can be overwhelming. Here are a few options to consider:
As a real estate professional specializing in new construction home purchases, I would advise that the very lowest risk option would be to sell your existing home first and move into a rental before signing the contract on a new construction home. Then you have no contingencies. This way there is no chance of not being able to sell your existing home in time to be able to close on the newly built home and possibly losing the new home (and the deposit you put down on it) because you were not able to sell in time. Being crunched to sell is not the best position to be in when you have intense pressure because the clock is ticking and your new home is almost finished being built, and it can force you to have to take a much lower offer than you needed just to sell it, not to mention the stress. Most new construction homes take about 7 to 8 months from contract signing to closing day, but this varies from builder to builder. We know of some builders in the area who take 6 or 7 months, and some even take 12 months. Also something to keep in mind, building a new home is not an exact science, so the time that your new home should be ready is only an estimate, and many things can change during the building process that could push closing back. The builder typically can’t give you an exact closing day until only approximately 2 weeks out from closing.
Another option that many people choose is to put their home up for sale just before seriously looking at new construction communities so it is already on the market. The builder’s site agent always wants to know if you have an existing home to sell and if you do, they want to know if you have it listed yet. It is good when you can at least tell them it is already listed. When you find a community you love with a home site and floor plan that you just have to have, you can go ahead and sign the contract with it contingent on the sale of your home. This way at least if your home doesn’t sell in time, you will still get the deposit that you put down on the new home back, but sadly, you would lose the new home that you put your heart into customizing for you family, which is heartbreaking. But this is worst case scenario. If you have your existing home listed before signing the contract, at least the way the market is right now in our area, there really should be no problem for the vast majority of homes to sell before the typical 7 to 8 months it takes for the new home to be ready. You would need to talk to your listing agent about how long they think it should take to sell your home and they should be able to give you a pretty good idea. If all goes smoothly and your existing home sells before your new home is ready, many people pack everything up and put it in storage and move in with relatives or friends who live in the area for a few weeks or months until it’s time to have closing on their new home. This option is a little more risky than the first, but from what I see with our customers, ends up working out fine.
The most risky option, but still the way some people choose to coordinate things, is to sign the contract on a new home and then put their existing home on the market after. Many times these people are confident that their home will sell very quickly and want to minimize or possibly negate altogether the amount of time they have to rent another place or stay somewhere temporarily between selling their existing home and moving into their new home. Sometimes doing things this way is actually not planned, but happens when a home buyer visits some new home communities and just falls in love with a home site and home and decides to spontaneously sign the contract. I can’t stress enough to make sure to put in the contract that the purchase is contingent on the sale of your existing home when going this route! Also, home buyers who do this need to get their existing home listed ASAP and let their listing agent know that they have already signed the contract on a new home and also let them know when the new home should be completed.
One other option I will mention, is that depending on the situation, some people financially are able to get approved for a mortgage on their new home without selling their existing home, and choose not to try to sell and instead rent it out after they move into their new home. Then they use it as an investment property until whenever they decide to sell it. This of course is ideal, but most people are not in the position to be able to do this.
Take note, if you decide to purchase a spec. (inventory) home from a builder, you can not already have a home that you have to sell – in other words, you can’t have the purchase contingent on selling your existing home. These homes are already in the process of being built or sometimes are already completed. Sometimes you can get a spec. home for a very good price because the builder is more motivated to sell them. Depending on how far along in the building process a spec. home is, sometimes you can still pick out all of your color and finish options. A nice thing with a spec. is that closing is a lot sooner since the home is already in process, if the home is already completed closing can be as early as 30 to 45 days from contract signing. So another benefit of selling your existing home first, is that when looking at new communities, if you happen to see a spec. home that you fall in love with, this option will be open to you.
Of course, the timing that you choose to sell your existing home and go ahead with purchasing a new construction home is totally up to you. Everyone has their own unique opinions, feelings, comfort level, and specific situations that will determine how they will want to handle the moving process. I just hope my insights and what I have seen with my other new home customers will help you make the best decision for you. I am happy to say that so far for every one of our customers, things have ended up coming together in the end and working out well for all of them to be able to move into their new homes.
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