Selling to Buy
Timing + pricing = success
Most buyers shopping for a larger apartment in New York will need the proceeds from the sale of their current apartment in order to afford their new abode. This sounds pretty straightforward, but in practice it can get a bit complicated, and one of the questions I get most is: Neil, do I need to get into contract with my current apartment first, or should I start by finding the new place? Which comes first, the purchase or the sale?
Generally speaking, it's best to have some money in your pocket when you're shopping since sellers' agents will take your offer a lot more seriously if you do. (And this is equally true in buyers' and sellers' markets.) So if you do need the proceeds of the sale in order to buy, you should endeavor to find a buyer who will let you do a "slow close" on your current unit, or one who will lease your apartment back to you after you close. (Or you could rent an apartment for a year while you look for a new permanent home, but this would of course mean moving twice…)
Next best would be to have your current unit in contract (and be prepared to prove it), so the sellers will know you're going to have your funds in plenty of time to close on your purchase.
But real estate – like love – works in mysterious ways, and sometimes you stumble upon the apartment of your dreams when you're just "window shopping," and once you're smitten… you and your agent will need to move quickly to make your dream a reality. In such cases, communication with the sellers' broker is key: I will need to assure them that my buyers are going to price their current home slightly below the market so that we have a very strong probability of fielding multiple qualified offers and getting into contract quickly.
I have dedicated some time to discussing the importance of proper pricing in this column previously, and here again, we can appreciate the benefits to pricing right on the money – or slightly below as long as it is an active market and prime selling season. Besides potentially driving the price up, having multiple offers will allow you to choose a qualified buyer whose timeline matches your own; someone who (as discussed above) might be happy to do a "slow close," or even to close ASAP and then lease the unit back to you for six months, for example, while you shop around for your new home. Or, as also mentioned above, you might attract an all-cash buyer looking to close right away if you've already found the new place.
In short, it's never too early to start speaking to your broker about realistic pricing for your current apartment as well as apartments you might be interested in trading up (or down) to. This way, you can track the movement of similar units, see how long they stay on market, and what they sell for. Armed with this information, you'll be better equipped to choose the strategy and timing that make the most sense for you.
