Selling a house and buying a new one

DH and I have been talking pretty seriously about putting our house up for sale within a year and looking for a bigger one with more property.

I am wondering about money though. For those of you who have sold a house and purchased a new one, did you:

a) Use the money from the sale of the first to put a down payment on a second

b) Save up the money for the down payment independently of the profits from the first

c) Combination of both

If you did C, what percentage would you say came from each? Heavily saved money or heavily sale money? I'm just trying to figure out how much we should save before even putting the house up for sale.

Re: Selling a house and buying a new one

It depends on a lot of circumstances. I work with a lot of first time sellers who are selling co-ops, condos or "starter homes" to move into larger homes (or sometimes sellers who bought large homes in one area, but want to move to another area... such as Nassau to Suffolk or even out of state).

Some of my seller clients have ample cash and good enough financial qualifications that they don't need to sell their first place to buy another. But the majority of the sellers I work with DO need to sell house #1 to buy a second place, AND they are relying on at least some of the sale proceeds for their down payment on their next home.

But I think your decision of whether to list now or whether to wait and save more would depend on how much equity, if any, you have in your home. Unfortunately, a lot of the sellers I work with now bought their first homes in the 2005-2008 timeframe, and even though prices have gone up a bit in the last year, they still can't get anywhere near what those top of the market prices were. So some of my seller clients barely break even and some even have to bring cash to the closing table. It's just the market reality.

So I would say that your first step should be having a real estate agent (or a few, since valuation of a property is somewhat subjective) to get an idea of what you could expect your property to sell for today. Then, see how that compares with your mortgage balance in terms of what you would walk away with if you sold now. Then, I would speak to your mortgage lender (or a mortgage lender, if you don't necessarily want to stick with your current one) to get a handle on how you could finance your new home (making sure there would be nothing in your way there) and what your loan options would be in the various down payment scenarios. That way, you know what you are likely to have in terms of down payment, and then can get mortgage advice on whether it would be better to wait until you can save more money (perhaps to avoid going FHA, or avoid paying pmi on a conventional loan with less than 20% down).

But it's hard to say, because everyone's situation is different, and everyone's motivation to sell is different. Of course, no one wants to bring cash to the closing table, but some people do because they truly NEED to sell.

Let me know if I could help or provide more information on this process (or consult with you on the value of your current home)!

Re: Selling a house and buying a new one

Thank you so much, Christine!

Selling a house and buying a new one

I don't know much because I've never sold a house but we are putting our house up on the market hopefully within this year or next year. We would want to do both- use money from the sale of this house and use saved money. I'm currently saving from every paycheck that is for our next house. I'm waiting it out until home values go up more. Not sure if I'd even break even at this point.

I'm one of the unlucky ones who purchased in 2008. We have been waiting it out ever since. It sucks.

Message edited 2/3/2014 3:12:24 PM.

Re: Selling a house and buying a new one

we sold our old house and used some of it for the down payment on the new house, not all of it. We wanted extra in the band.

Re: Selling a house and buying a new one

We will be using both. I would estimate 75% of the down payment will be coming from the proceeds of the sale of this house.

Re: Selling a house and buying a new one

We were also one of the unlucky ones (we bought in '07 and we are in a Sandy damaged home), about 75% of our down payment will be from the sale of our home.