Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
As the weather continues to heat up, so does the real estate market. This time of year always brings about a lot of real estate activities, and an abundance of new homes onto the marketplace. With a now stable housing market, and growing economy – the “move up” buyer is becoming more active than years past. These are current owners of homes that are now making the decision to trade-up (or sometimes down) based on changing circumstances in their lives. One of the many challenges in such situations is that much of the funds that this person would be using to purchase their new home, is very often “tied up in equity” in their existing home. The question becomes, is it possible to potentially buy a new home without the contingency to sell their current home?!
Today’s would-be homebuyers are savvier than ever, and much research is already devoted before they even reach out to their Realtor of choice. Typically, when considering a new home purchase by an existing homeowner, the first call is usually to a friend or neighborhood Realtor to try to evaluate their market options. Conversely, many homeowners will carefully debate whether to even enlist the assistance of a Realtor, possibly considering the For Sale By Owner (“FSBO”) route. Simply put, with the tools and resources available in the marketplace today, many homeowners from jumping into the home buyers marketplace, even before they put their current home on the market.
For a majority of homeowners out there, I question these preliminary strategies altogether. In my humble opinion, the first call should be to your financial advisor or local mortgage lender. (Sorry to all my real estate friends). I’ve had several instances these past few weeks where based on the advice of a local realtor, a homeowner quickly jumped to list their home, and when the time came to put in an offer on a new home they were faced with the challenge of not being able to qualify accordingly. Even worse, I have spoken to a few homeowners who did not even speak to a Realtor, and instinctively placed their home on the market as a FSBO, assuming everything would fall perfectly into place. Needless to say, without a buyer for their home, they couldn’t be a buyer on the new homes they desired.
Its human nature to believe that by having gone through the homebuyer’s process once before, that they are equipped with all the essentials needed to make similar decisions the second time around. Many homeowners mistakenly believe the only factor of concern is the availability or accessibility of the needed funds for closing. That is certainly a big concern, but far from the only one. If their home is not sold before they need to buy, will they still be eligible for financing carrying both mortgages?! This is obviously different from the first time home buying experience, where only rent was being paid, and is typically not a factor of consideration for qualification. Assuming they do find a buyer in time, what about the timing of both closings? What about the expenses of selling a house including real estate commissions and costly sellers transfer tax? What are the tax implications of selling a house at a gain, or at a loss? These are but a few examples of a myriad of details that should be discussed and considered before embarking on a Buying-before-Selling experience.
That said, with the guidance of a local mortgage lender, who has a firm grasp of the local marketplace, including the players and moving-parts, many of these concerns can be anticipated and accounted-for. Knowing the local market, Approved Funding offers unique solutions such as Bridge-Financing to help account for funds tied up in equity. Mortgage Debt Exclusions, where current mortgage obligations can be removed from qualification, is another distinctive offering we are able arrange for certain homeowners. Equity Based Loans can sometimes help bridge the gap in certain circumstances. Again, these are but a few of the many creative and distinctive offerings available by “Common-Sense” lenders, such as Approved Funding.
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