How to Use Equity to Move to Your Next Home

It’s time.

I’m here to tell you it’s time. You’ve owned your home for a while. Years, in fact. In that time the real estate prices have been increasing and your equity has expanded. So now it’s time to move to a house that will fit your equally growing family; or shed that space that you don’t need any more.

If this description fits you then you may be in a perfect position to move to your next house using the equity from your current home.  But how do you do that when your down payment funds are locked up in your home. And how do you know if it’s the right time to move?

Let’s answer the second question first. Home prices in the Portland metro area continue to be on the rise. The inventory squeeze in Portland and the predicted future influx of population makes the chances of a pricing downturn miniscule. What does this mean for you as an owner? It means that though the sales price of your current home will rise, the acquisition price of your next property will also rise. Add to that the creeping increase in interest rates, and my recommendation will, in 99% of clients, be to move now rather than wait. Hesitation won’t work to your advantage.

If you’ve decided to move, but need to use the equity from your current home to purchase your next, how on earth do you manage that? Should you start with selling your current home or buying your next before selling?  Both have risks and rewards, and in this post I’ll quickly review both.

Buy first

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Many people choose to purchase their new home first. Some buyers with good credit and income - and a lot of equity - are able to buy a new home before selling. Using a home equity loan, as allowable by your lender, permits buyers to pull money from their current home and use it for a down payment for their next home. The advantages of this are obvious, as they allow buyers to look for a new home on their own timeframe, without the pressure of selling their home first. They also eliminate the need for financing contingencies beyond the standard appraisal which all lenders require. 

This means that buyers are able to remain as competitive as possible in what continues to be a seller’s market. The risk is that buyers could end up with two mortgages for an extended period of time, or their current home may sell for less than expected, putting owners in a financially tight situation. 

Buy/sell using a contingency

Another option is to write a clause into the sales contract making an offer contingent on the sale of a buyer’s current home. This conditional sale allows a buyer to make sure they can secure a new home before selling their current home, eliminating most of the financial risk. It also often possible to coordinate closings so that the buyer can move directly into their new home eliminating the need for moving twice or finding storage.

However, as long as it remains a seller’s market, the stars must align just right for this option to work. You and your Realtors must find a seller willing to entertain a contingent offer, and if a competing buyer makes an offer that is not contingent on the sale of their home it’s difficult for the contingent buyer to win out. It also puts pressure on the person with the contingent offer to locate and secure a new home in a short time-frame once they have an offer on their current home. And if you write an offer on a home before securing an offer on your current property, the offer remains “bumpable” – meaning that someone else may write an offer on the home and the seller may opt to choose it unless the contingency can be removed. It’s a complicated approach with various moving parts that need to be timed right (and probably deserves to be examined in more detail than it is here). The contingent offer option can work, but a buyer may have to be quite patient before landing an offer that works.  

Sell first

For most clients, this is the option I like best. Have you ever heard the phrase measure twice cut once? How about sell first move twice? I just made that up, but it’s what I often recommend. What?! Move twice?! Well, hear me out. Selling first removes the financial risk associated with carrying two loans. It allows a homeowner to know exactly what they’ll net with the sale of their home and therefore the amount of money they have to put down on the next. With the abundance of available moving and storage companies, people who sell first will often store their belongings and find a short term corporate or Airbnb rental while they search for a new home. Some people even have fun with it, exploring a new part of the city that they may not have spent time in before. This approach removes the pressure of finding a home in a limited amount of time, as might happen with a contingent sale or when someone has the financial pressure of carrying two loans. This, ultimately, is the biggest advantage. Clients who have gone this route invariably have said that the stress of moving twice was more than offset by knowing exactly how much they could afford and the ability to take the time to find the right new home – not settling for a “just ok” fit – without feeling under the clock.

If you want to explore these options, or tell me that it’s crazy to think you’ll sell first and move twice, give me a call or come in to talk and we'll find the right approach to getting you into your new home. 

- Amy Seaholt

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Understanding Radon

AND A COOL INTERACTIVE MAP, TOO!

The map areas correspond to zip codes. Click on each for a summary of information about radon in the area.

The map areas correspond to zip codes. Click on each for a summary of information about radon in the area.

Radon is dangerous. I think just about everyone knows that. But how dangerous is it? That's where things start to get a little fuzzy. A friend and colleague recently endured a few months of radon poisoning with almost deadly results. This can happen to anyone that lives in a home with exposure risk. It's important to understand this deadly gas, why you should be aware of it, and how to mitigate the risk to you and your family.

The State of Oregon publishes an interactive map of indoor radon risk levels that was recently updated. This is a useful tool, but be aware that no matter the risk level in your area, you can still encounter a radon problem.

SO WHAT IS RADON?

You can't smell it, see it, or taste it. It's literally radioactive. It is the second-leading cause of lung cancer in the United States. But what in the world is this stuff and why does it want to kill us? Let's go into geek-speak for just a second.

Not the best illustration, but it's colorful!

Not the best illustration, but it's colorful!

Radon is a colorless, chemically-unreactive, inert gas discovered in 1899 partly by Ernest Rutherford and in 1900 partly by Friedrich Ernst Dorn. It is 9 times denser than air, which is an important factoid to remember. It easily penetrates almost any material in a building, including sheetrock, concrete block, wood paneling, and most insulations.

Radon is naturally occurring in the ground and is the result of the breakdown of uranium present in soil, rock, and water. It occurs in several isotopic forms, of which radon-222 occurs most frequently. When this gas is released into the environment, it results in the formation of decay products that are radioisotopes (a chemical element that has an unstable nucleus and emits radiation during its decay to a stable form) of heavy metals (polonium, lead, and bismuth). These decay products can easily be inhaled because they rapidly attach to other airborne materials (like dust). It also may be ingested if it is highly concentrated in groundwater (well water), but the inhalation of radon is of higher concern.

WHAT ARE THE SYMPTOMS OF RADON EXPOSURE?

Respiratory problems are the most common signs of radon-related distress. These problems can include: a persistent cough that doesn't get better, difficulty breathing, chest pains, the coughing up of blood, wheezing, hoarseness and recurring respiratory infections such as pneumonia or bronchitis. Radon exposure can lead to lung cancer.

A lesser known symptom of radon exposure is neurologic issues. Anxiety, memory loss, and depression could be a sign of radon exposure. However, brain health and function issues have many, many other possible causes, so this is not a symptom often mentioned.

Serious effects from high radon levels are cumulative over a long period of time. It's important to periodically test for radon, but the presence of high radon levels in your home or a home you are thinking about buying is not a reason to panic.

WHERE DOES RADON OCCUR?

Radon is found in every state in the country. If you take a look at the map and find that you are in an area that is considered low-risk, you still may encounter a radon problem. It often enters the home through cracks in floors, cracks in walls, gaps around service pipes, joints between floor and walls, gaps around drains/pipes, etc. You may have no problem at all with radon while your immediate neighbor is dealing with extremely high radon levels.

HOW DO I TEST FOR RADON?

Okay, so this vat is 100% more like the stuff the Joker falls into than it is like radon, but I'm running out of visuals, here. 

Okay, so this vat is 100% more like the stuff the Joker falls into than it is like radon, but I'm running out of visuals, here. 

Short term, long term, and continuous tests are available for radon. Tests should be conducted in the lowest livable area of your home (remember how radon is denser than air?). If you are considering selling your home, I highly recommend conducting a short term radon test before listing the home on the market. It doesn't cost much and is very much worth knowing the results before you're in the middle of a transaction!

Most people start with a short term test to determine whether or not further testing is necessary. The test takes between 2-7 days and are then mailed to a lab to determine the results. These are available at most home improvement stores and online. 

Long term tests measure radon levels between 90 days and a year. They are more accurate than short term tests because radon levels can vary significantly from day to day and month to month. These tests are usually available through state agencies and online retailers.

Continuous radon testing devices plug into an outlet and can be used for both short and long term testing. They will give you a running average radon level. These are available from online retailers such as Amazon.

Home buyers: It's important to note that if you purchase a home in summer and conduct a radon test, you should conduct another test in winter when radon levels are more likely to be an issue.

SHOULD I TAKE ACTION?

One out of every 15 homes in the U.S. have radon levels that should be lowered. Fortunately, reliable techniques exist to reduce radon levels in homes so that almost any home with high radon levels can be fixed. If you have a radon problem, you can hire an experienced radon contractor or accomplish the repairs yourself.

The EPA recommends doing a second test if an initial short-term test registers 4 picoCuries per liter (pCi/L) or higher. A long term test is ideal, but you can perform a second short term test if you need results quickly. If the second test results in levels higher than 4 pCi/L, consider taking action to mitigate radon levels in the home.

WHAT CAN I DO TO MITIGATE RADON IN MY HOME OR REDUCE RISK?

Ventilation = good

Ventilation = good

It does take more than just sealing cracks in the foundation to mitigate radon risk and/or exposure. Active soil depressurization or fan and exhaust systems have proven to be cost-effective and reliable. 

Radon that escapes out into the air is not a problem as it quickly becomes diluted. Therefore, ventilation is key. Ventilation can be increased through opening doors, windows, and vents. Many people like to block their crawlspace vents in winter and/or install additional insulation in their crawlspace. Blocking crawlspace vents provides very minimal energy savings so unplugging these vents and possibly moving some insulation around may be all it takes to mitigate a mild to moderate radon problem. A heat recovery ventilator (air-to-air heat exchanger) can also be installed to increase ventilation.

All information above is provided for educational purposes. It is always recommended to consult a radon professional if you have any concerns about radon in your home.

- Brandi Whitaker