Lew Sichelman
For homeowners thinking about cashing in on today’s blistering housing market, the situation has become something like a cat chasing its tail.
Demand is such that many properties are selling above their listing prices, often in days, largely because there are so few houses on the market. And that’s the conundrum for sellers. If there’s little to buy, they may not have anywhere to go once someone purchases their current residence.
According to the latest figures from the National Association of Realtors, there are only 1.8 million houses for sale – nationwide! That’s the fewest since January 1999. At the current rates of sales, some submarkets in the Washington, D.C., area, where I live, have less than two weeks’ worth of houses listed for sale.
And what’s for sale isn’t for sale long. In December, properties typically remained on the market for just 18 days before they were gobbled up, the National Association of Realtors reports. Nearly 4 out of 5 houses sold in that month were on the market for less than 30 days.
People are still falling all over themselves to buy, too. The Redfin realty firm says 3 out of 5 of its agents who made offers on behalf of clients in December faced competition from other buyers. That’s down from the peak of 75 percent last April, but still a lot.
In some cases, the eventual winners are going way above list price to take the prize – which is why now might just be the time to put your place on the market, before rising interest rates get out of hand. If only you could find another house to move to!
What Options Exist?
Fortunately, there are ways to deal with this dilemma, though none of them are optimal.
One way is to put your stuff in storage and move into a short-term rental, whether an apartment or another house. That will give you three to six months to find another place. Or, if you want to wait until the market settles down and prices become somewhat more reasonable, you can rent for a year or more.
Of course, this entails moving twice. Moving even once is usually a royal pain – it ranks right up there with a root canal. But twice in a short period of time? Even worse!
Another possibility is to move in with a friend or a family member for a while. Years ago, when my bride and I built our current home, we sold our old place and she moved to our beach house, while I moved in with one of my adult children so I could remain close to work.
Obviously, not everyone can take advantage of this kind of situation, and it isn’t ideal. But it may work for some.
A better way to solve the sell-now-buy-later problem is to require your buyer to delay the closing. In this market, many buyers are willing to do that – some for several months. Such is the desire to buy now, before mortgage rates get out of hand.
When we sold our place, my memory is such that we were able to delay closing for almost three months before the buyer, who was moving with his family from Dallas, put pressure on us to meet him at the closing table. We did.
Bank’s Buy-In Needed Sometimes
But beware: Most lenders will only allow their borrowers to put off settlement for 60 days, tops. Otherwise, borrowers will have to requalify for financing, the reason being that something could change and either disqualify them or cause the lender to raise their rate.
That possibility is a good reason not to postpone closing. You never know what’s going to happen. Maybe your buyer will change jobs or buy a big-ticket item like a car, either of which will impact their lender’s decision. But if your buyer hasn’t lined up financing yet, you may be able to stay in your place longer than two months while you hunt for another house.
It’s not a good idea for any would-be buyer to jump into the market without first having funding in place. It’s not a good idea for sellers to consider an offer from someone who hasn’t been preapproved, either. But if that’s the position in which you find yourself, it could be to your advantage.
Another possibility is to lease the house back from your buyer for a specified period of time, perhaps a month or two, or just until you find another house. You might even be able to extend the closing date for 60 days and then lease the place for two more months, giving you 120 days to buy your next home.
In today’s market, real estate agents tell me, some buyers are more than willing to lease their new homes back to the previous owners. Some, I’m told, are not even charging rent. But if your buyer wants you to pay for the privilege, a fair price might be to cover the mortgage payment for however long you stay.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
