Buying a new home while selling your current one is a balancing act. Here are some practical tips to help you succeed as both a buyer and seller.
Buying a new home at the same time as you’re selling your old home is all about timing — and some luck, of course. And while you can’t control everything that happens during the complicated buying and selling process, there are some things you can do to set yourself up for smooth closings — maybe even on the same day!
Consider this key information on how to buy and sell a house at the same time.
Evaluate the local housing market
The state of the real estate market in your area is often the biggest factor in timing your home purchase and sale correctly. Knowing what kind of market you’re in is important whether you’re just moving across town, or if you’re moving across the country. If you’re selling in one market and buying in another, you’ll need to factor that into your timing. The length of time it takes to buy and sell can vary dramatically depending on the local real estate scene.
What is a buyers market?
In a buyers market, there are more homes available than people looking to buy. In a buyers market, you’ll likely have an easier time finding your new home than you will selling your old home. Sellers may be willing to accept a contingent offer, which means you agree to purchase their home contingent on selling yours first — more on that later.
What is a sellers market?
In a sellers market, there are more buyers in the marketplace than there are homes available. In a sellers market, your current home will likely sell more quickly than you’ll be able to find a new home. Consider asking your buyers to do a rent-back after closing to allow you time to find your new place.
|If you’re in a…||What to do|
|Buyers market||Make an offer with a sale and settlement contingency|
|Buyers market||Request an extended closing|
|Sellers market||Make an offer with a settlement contingency|
|Sellers market||Ask for a rent-back agreement|
Choose an experienced real estate agent
Buying and selling at the same time can be complicated and at times overwhelming, so it’s helpful to have a pro by your side. An experienced local agent will not only be able to help you determine the market value of your home, but they’ll be able to talk you through timing, strategy, and negotiation.
An agent can guide you to a listing price
In addition to answering questions about process and helping you negotiate, one of the most important roles your agent plays is to help you find the perfect listing price — one that will help you sell on your desired timeline and for enough money to help you take that next step. They’ll use their local market expertise and comparables to inform the price.
Understand your financials
After you’ve chosen an agent and gotten a feel for your local market, it’s time to know your numbers. Reach out to both your mortgage lender and your financial planner to see what’s feasible based on your financial situation. The amount of liquid cash, the amount of equity in your home, and the loan products you qualify for can all factor into which path you take.
Determine your home’s likely resale value
Part of researching your equity is knowing how much your house will reasonably sell for in the current market. Consider completing a pre-inspection so you know how much work needs to go into your house before selling, or the types of concessions you’ll have to make to a buyer to cover those repairs.
Know how much equity you have in your home
If you’re selling a house with a mortgage, do some initial research to find out how much equity you have — meaning the amount left over when you take the current market value of your home and deduct what’s remaining on your mortgage. Also, consider if you’d be able to purchase without tapping into that equity. Remember, the equity you have in your home won’t be accessible until after the sale closes.
Buying a house before selling
If you choose to buy a second home before selling your current home, here are some ways to make it happen:
- Make an offer with a sale and settlement contingency: In this scenario, you’ll focus on finding a new home before you list the old one. Once you find a house you love, you’ll submit your offer with a sale and settlement contingency, which means you’ll buy the home only if you can successfully sell your existing home. Typically, the sellers of the home you’re buying are still allowed to seek other offers, but you’ll receive the first right of refusal if you’re unable to remove the contingency when a second offer comes in. Contingencies typically work best in buyers markets, when the seller is less likely to get another offer.
- Request an extended closing: If you’re confident that your existing home will sell in a short period of time, you can request to extend the closing date of your new home, past the standard 30-45 days. This will give you enough time to sell your current home and use your home equity to buy another house. Just like with contingent offers, you’re more likely to have success with this strategy in a buyers market.
- Purchase with significant savings: If you’re in the financial position to do so, the simplest route is to use your savings to pay your new down payment, then sell your old home after the dust settles. Keep in mind that you’ll also need money to cover closing costs, inspections, and moving expenses.
- Purchase with a HELOC: A HELOC, or home equity line of credit, allows you to borrow against the equity in your current home. If you qualify, you could use a HELOC to access money for your down payment, then pay it off when your home sells.
- Purchase with a bridge loan: A bridge loan is a short-term loan offered by a bank to cover your down payment, just until your sales close. Make sure to talk to your banker about this option early in the process, because not all banks offer this product and it can be hard to qualify.
- Rent out your first home: If you don’t need the money from your first home to make your down payment on the new home, you could always find renters for your old home, which would allow you to cover the mortgage costs while delaying the need to sell at the same time as you’re buying
Pros of buying before selling
- You have somewhere to move right away.
- You only have to move once, which allows you to save money on storage units or temporary housing costs.
- You’re less pressured to make quick buying decisions, as you can always stay in your current home a little longer if you don’t find a property you love.
Cons of buying before selling
- You may feel rushed to sell, which may lead you to take a lower offer than you would otherwise.
- Contingent offers are less competitive, especially in fast-paced markets.
- You may not have enough cash to make a competitive offer if your money is tied up in your current home.
- If you decide to rent out your current home, being a landlord isn’t always a walk in the park. And, when you do decide to sell, it can be a challenge to sell while tenants are living in the home.
Selling a house before buying
If you’ve decided to sell your current home first, here are some steps you can take to make the process a bit smoother.
- Make an offer with a settlement contingency: In this case, you’ll list your house first, then once you have an offer in hand (but before closing), you start looking for your new digs. When you find a house you love, you’ll submit an offer with a settlement contingency, which means you’ll buy the home contingent on the sale of your existing home closing. This works best in a seller’s market, where you can expect to receive offers on your existing home fairly quickly.
- Find a temporary rental to live in: Yes, you’ll have to move twice, but sometimes closing one sale before starting another one can be the least stressful option, as it takes the pressure off the timing and gives you the time to find a home you really love.
- Sign a rent-back: A rent-back provision is when you go through with the sale of the home, with the agreement that you can rent the home back from the new owners (and keep living in your home) for 60-90 days. This option can give you more time to shop for your new home, while still giving you access to the money from your sale. Keep in mind that this option works best in a sellers market, where buyers have to be more flexible with contract terms in order to get the home they want.
Pros of selling before buying
- You know exactly how much equity you’ll have available to put toward your new home.
- You can easily roll your existing equity into the new purchase.
- It can be less stressful to close the book on one chapter before focusing on your next move.
Cons of selling before buying
- You’ll likely have to find a temporary living situation.
- Storage and double moving costs can add up.