Rapid home sales leave sellers with no place to move

When Kari and Thor Torstenson’s home in Charlotte, North Carolina sold in less than 24 hours, they had mixed emotions.

Of course, they were thrilled that the repairman they’d put four years of work into sold quickly — not to mention $45,000 above the asking price. What wasn’t so great, though? They had not yet found a replacement house.

“It’s really an uneasy feeling, especially since we have two children under the age of three,” says Kari.

Although the couple have made offers on several homes (one of which isn’t even on the market yet), they have yet to find a new property since their home went under contract in March. As Kari says, “the market is very competitive”.

That’s right – and not just in Charlotte. In Rochester, NY, Lindsay Cray sold her home in just six days. Like the Torstensons, she has also been unable to find her next home.

“Selling your home can be lucrative right now, but this market makes you feel like it’s impossible to find another one,” Cray says.

Such stories are not unique in today’s competitive real estate landscape. With housing inventory at record highs and strong buyer demand, the few available properties are selling at lightning speed – and often at a price well above the asking price.

Competition for homes is fierce

According to real estate broker Redfin, currently nearly 60% of homes are under contract in just two weeks and 46% are sold in seven days or less. Besides that? Almost half are selling for more than the asking price, the highest share on record.

While the latter is certainly good news for entry-level sellers, it also leaves many in the lurch – delighted with the quick and profitable sale of their home but unable to find a new home quickly enough (or in their price range) to replace it.

“One of the hardest parts of selling a home in a booming market is knowing what happens after the home is sold,” says Matt Van Winkle, owner of RE/MAX Northwest in Seattle. . “The timing of a buy and sell is incredibly difficult in most markets, but especially so when most sellers won’t accept an offer contingent on the sale of the buyer’s home.”

Contingencies are clauses in a sales contract that allow the buyer to opt out in certain scenarios. A sale contingency, for example, would allow a buyer to terminate the transaction if they were unable to sell their own home. Since this carries additional risk for the seller, most are unwilling to accept these offers in today’s hot market.

“With the hot market we’re in right now, contingency bids aren’t being considered 99% of the time,” says Gordy Marks, also at RE/MAX NW in Seattle.

Request a sale-leaseback

“When selling a property, there are two distinct stressors: selling too quickly or selling too slowly,” says Christopher Totaro, real estate agent at Warburg Realty.

For those in the sell-too-quick camp, agents say the best solution is what’s called a rentback or sale-leaseback agreement. This allows the seller to rent the home to the buyer after the sale is finalized, usually for a few days to a few months. This gives the seller more time to find a property and allows them to use the proceeds from the sale of the home when they do.

“Every seller should have several contingency plans when selling their home,” says Van Winkle. “One of the best strategies we’re using right now is a post-closing seller annuity.”

Of course, not all buyers will be in favor of a sale-leaseback, but given today’s hot market, agents say most are at least open to considering one.

“I see buyers are willing to wait for the seller to find a home,” says Scott Barrows, an agent for Keller Williams who negotiated a three-month sale-leaseback for Cray earlier this month. “Ads are so low that buyers will wait.”

Typically, sellers would pay a daily, weekly, or monthly rate to rent the home to the buyer. But in today’s market, many buyers are willing to forego these fees just to win a bidding war.

“I would say that a third of the contracts being written have an annuity of some duration – usually free to the seller,” Marks says. “If the buyer does not want to give the seller an annuity, he simply will not have his offer accepted.”

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Consider an Airbnb or a monthly rental

Sale-leaseback is usually the optimal option for sellers, but if it’s not on the table, there are still plenty of solutions for those whose homes are selling quickly.

For one thing, sellers can move in with friends or family, which the Torstensons are currently considering. This requires storing most personal effects, but for sellers with close relatives, it is often the most economical choice.

“Short-term furnished rentals are also a viable option,” Totaro says, referring to Airbnbs, VRBO and other similar properties. “You can have your furniture stored by the moving company and live out of a suitcase. Ideally, you receive a premium for your property, so the extra funds – hopefully – outweigh the hassle factor.

He is largely right. Storage costs between $60 and $225 per month depending on where you live, and while the monthly price for an Airbnb is usually a few thousand dollars (here in Houston it averages between $700 and $2,500), the math still works for most buyers. ‘ favors – especially with listing prices up 15% from last year.

In some scenarios, traditional rental properties may also be an option. Many apartments and single-family landlords offer short-term, sometimes even monthly, leases. These usually cost more than your standard one-year lease, but that’s not always the case. In more urban areas, where residents have moved to the suburbs in recent months, landlords may be willing to strike a deal.

This rental approach is what Doug Hentges – whose North Dallas home sold in two days (with 30 offers!) – plans to take in a few months. Although he negotiated a two-month sale-leaseback, his new home under construction will not be completed until August or September. He and his wife, Audrey, will get an apartment to bridge the gap.

Although Hentges plans to stay in the area during this time, other vendors — especially those working from home — may want to hit the road. This can mean getting a short-term rental in a different city every week or month, or living with various friends and family across the country while finding a more permanent home.

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Technological solutions for risk showers

Despite all these options for this dreaded dilemma of selling too quickly, some sellers still don’t want to take the risk, no matter how much money is on the table.

“We’ve had sellers turn down great offers because they couldn’t find a great option to move,” says Janie Coffey, real estate broker for The Coffey Team in Jacksonville and St. Augustine, Florida.

For sellers of this risk-averse boat, avoiding the open market altogether may be a better course. This could mean selling to a “We buy ugly houses” type investor (they usually have more flexibility, just be careful of the real estate scams) or exchange the property with a iBuyer like Opendoor, Zillow Offers or Offerpad or an alternative like Knock. These companies buy homes directly from owners, fix them, and re-list them later, after the seller leaves.

Many even have programs designed for this situation. Knock, for example, has a “Home Swap” program, which allows you to buy your new home (with a Knock-based cash offer no less), move out, and pay just one mortgage while the business sells your property.

Offerpad has a similar alternative, dubbed the “Extended Stay” program. While this doesn’t help you buy a home, it does give you more time, allowing sellers to stay in their homes for 30 days after selling their property to the company.

According to Offerpad founder Brian Bair, the program allows homeowners to “sell quickly and move freely without the fear and stress of having to find a new home at the same time.”

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