Move-Up Buyers


Many homeowners have owned their current home for a while and would like to “move up” to a larger, nicer, or more conveniently located home, but they may not be familiar with how to orchestrate that move. The two primary concerns associated with moving up are 1) the possibility of owning two homes simultaneously, and 2) the possibility of owning no home due to the inability to find a new home in a hot market.

At DeLeon Realty, we enjoy helping our clients orchestrate their move-up transitions by utilizing a variety of strategies. This article will describe four strategies for buyers who are planning on moving up.

First, the most commonly utilized move-up strategy is simply purchasing the new home and then selling the current home. This strategy is utilized by buyers who do not need to sell their current home in order to purchase their new home. It is the simplest strategy.

Second, for buyers who need the equity from their current home to purchase their new home, a strategy that can be implemented is to temporarily borrow money. The borrowed money could be from their current home in the form of a home equity line of credit (HELOC) or from their retirement funds in the form of a short-term loan. These loans would be paid off at the closing of the new home.

Third, a lesser-known move-up strategy that many buyers find beneficial is to utilize programs offered by our recommended lenders that are tailored to the needs of move-up buyers. One such lender-sponsored option that works well in hot markets is one in which the lender will qualify the buyer for the new home purchase as if the debt for the current home does not exist. The main prerequisite for this program is a signed listing agreement for the current home showing the buyer’s intent to sell it.

Because DeLeon Realty has many attorneys on staff, we can draw up carefully crafted documents that provide our clients with more and better options.

Fourth, a move-up strategy that is the least well-known is the lease option strategy. While this strategy requires legal paperwork to protect both buyers and sellers, when performed correctly it is an incredibly powerful approach. This strategy can best be described to you by sharing a true story.

A couple owned a condo and wanted to find a single-family home that could accommodate them and their soon-to-arrive baby. After several months of looking, they finally found their perfect home, which had just gone on the market. This home had several interested buyers, and they wanted desperately to purchase the home. Unfortunately, their equity was tied up in their condo, which they needed to sell. To be competitive in this hot market, their offer needed to be extremely attractive—e.g., all-cash, no contingencies, short close of escrow—none of which were an option for them.

Their DeLeon buyer specialist suggested making an offer with a lease option. The lease option was crafted in such a way that it accommodated the financial and living situations of the sellers and the buyers. The offer included two key features: 1) an up-front payment to the sellers in exchange for a 90-day option to purchase the home for an agreed-upon price, and 2) the buyers could immediately move into the new home and pay rent. Because this offer fit the needs of the sellers, they accepted it over an all-cash offer at the same price.

The buyers moved into the new home, set up their nursery, and awaited the arrival of their firstborn. All the while, their condo was prepped, staged, marketed, and sold quickly for significantly more than expected. Upon the closing of their condo, the buyers immediately exercised their option to purchase the new home. These buyers were thrilled to purchase their dream home in this hot market without needing to submit an uncompetitive offer.

Thus, in this hot market where supply is low and demand is high, it is crucial to engage a sophisticated real estate agent, like DeLeon buyer specialists, who could turn even an impossible situation into a winning offer.