How to get started with long distance home buying to make sure your big move goes as smoothly as possible.
Q: After living in the same house for over 40 years, my wife and I are planning to move across country a year from this summer.
How does one go about finding a house from 1,500 miles away? Can we use the equity in our current home (e.g., 2nd mortgage or an equity line of credit) for a down payment? Is it better to sell, move, then buy or buy a house, move, and then sell? How soon before I want to move should I start the process?
I probably have a zillion other questions, some of which I haven’t thought of yet. I read your column regularly in the Saturday Home Guide of the Long Beach (CA) Press-Telegram, and I would love to see a series of columns addressing long-distance moves.
A: Thank you for your questions and for reading our column. We’ve actually written quite a number of columns over the years about long distance moves because the distance causes an additional level of complexity – particularly if you’re not as familiar with your new location of choice as you are with a neighborhood that’s in closer proximity.
However, while the distance with a long distance move is the thing that gets highlighted, the process tends to be the same as a local move, though there are some interesting (and localized) differences.
When selling and buying (but especially when you’re buying long distance), you’ll need a good team of people to help you out. For your sale, please find a good real estate broker, real estate attorney (in places that use real estate attorneys to close residential real estate transactions), title or escrow company, moving company, and a contractor or handyman-type of company to help fix things in the home you are about to sell.
Likewise, for your purchase, you’ll need a real estate agent or broker, an attorney, home inspector, mortgage lender or mortgage broker, closing agent and tradespeople to help with any repairs you might need in your new home.
For your situation, we’ll skip over how to find the right team and instead talk through the important timing issue of whether you should sell first and then buy or the other way around. The answer depends on what’s happening in your local real estate markets along with a good understanding of how strong your finances are.
Right now, the market in most of California is very active and homes are selling quickly. If you list your home today, you might end up selling the home before you’re quite ready to move or have found a place to live across the country. But, you wouldn’t have to worry about taking out a home equity loan or line of credit because you’d have the cash from the sale of your house.
On the other hand, if homes are selling quickly in your new neighborhood of choice (perhaps even faster than in your California neighborhood), you might want to make an offer to buy and then rush home to pack up your home and get it ready to sell. Typically, most people have too much stuff in their homes when they sell and by starting the clean-up process now, before you’ve listed your home, you’ll take a load of work off of your shoulders by the time you actually list your home for sale or it comes time to move.
However, if the area you live in is a slower market, where homes are listed for months before generating an offer, it might take you quite some time to find a buyer for your home. If that happens, you might not have the financial wherewithal to withstand owning two homes for a prolonged period of time. If your finances would not permit you to own two homes for a long period of time, you should sell first and then buy. If you don’t, what would you do if you ended up with two homes for two to five years? That could be a real problem for you, even if you wind up renting what is now your primary home.
On the flip side, if you are trying to buy a home in a market on the other coast where homes are selling quickly, you might lose out on the home you want if you don’t put an offer in. It might be heartbreaking to lose a home that you fall in love with, but it’s better to lose the home than end up in a financial pitfall.
If home’s aren’t selling or aren’t selling quickly, you might have a pick of homes coming from California. You’ll have to assess the situation in either case. But, you should always remember that it’s always fiscally prudent to sell first and then buy. In the worst case scenario, you rent for a year and pay for two moves. But, that’s much better than owning two homes simultaneously or even buying the wrong home because you feel pressured to make an offer quickly.
Financing the purchase comes down to whether you have good credit and if you’re employed or receiving some regular cash (perhaps from Social Security or a pension). If you’re employed, then you’ll have no trouble getting financing from a local lender. If you’re retiring and are anticipating using your cash from the home sale to finance the purchase (but might need a down payment and temporary loan until the property closes), then you’ll want to move carefully.
If you have all lot your money tied up in your existing home, you might need a home equity line of credit to put a downpayment on the new home. But in some areas you only need $1,000, $5,000 or 5 to 10 percent of the purchase price to put down.
So, sit down with your spouse or partner and discuss how much stress you want to be under when you move across the country. Because dealing with a new location entails quite a bit of stress. The last thing you both need is to start worrying about selling a home 1,500 miles away from your new one.
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