If you’re a homeowner looking to buy your next home, you’re probably juggling selling and buying at the same time. Ideally, you would be able to go under contract on both properties on the same day, but that rarely happens. Expect it to take some time between selling your home and buying a new one, or vice versa.
This Redfin article outlines the steps to selling and buying a home at the same time. Whether you’re in Indianapolis, Indiana or Lubbock, Texas, here’s how to sell and buy a home at the same time, and what to expect along the way.
Start by understanding your local housing market
The first step when buying and selling a home at the same time is deciding whether to sell or buy first. Start by evaluating your local housing market to determine which options make the most sense. If you’re moving to a new city, the housing market may be different, so you’ll need to adjust the timing of your home sale accordingly. Understanding whether you’re in a buyer’s or seller’s market is a great place to start.
Is it a buyer’s market?
A buyer’s market means there are more homes for sale than buyers. As a buyer, you will have more options and bargaining power. However, selling your home may take longer than expected.
Options to consider:
Home Sale Contingency: You can cancel your purchase if your current home doesn’t sell. This is useful if you are counting on the proceeds from the sale. Extended closing: Gives you more time to sell your home before you complete the purchase.
Is it a seller’s market?
A seller’s market means there are more buyers than homes for sale. As a seller, it will probably make selling your home easier. However, buying a home in this market can be difficult.
Options to consider:
Settlement Terms: Used when you have accepted an offer on a home but need to close the sale before purchasing a new home. Rent-back agreements: You can temporarily rent your home from a new owner, giving you more time to find your next home.
Sell or buy first – which option is best for you?
The best approach will depend on your financial situation, risk tolerance, and housing market conditions. Here are some things to consider:
Sell first if: Buy first if: You will need the proceeds from the sale of your home as a down payment on your next home. You have enough savings and financing options (such as a HELOC or bridge loan) to cover the down payment before you sell. You don’t want to risk paying two mortgages at once. I want to avoid the stress of finding temporary housing. You are in a buyer’s market. It takes a long time for a house to sell there. You may be in a seller’s market, homes selling quickly, and you may have trouble finding a new home.
Advantages of selling your home first
Reduced financial burden: You don’t have to pay two mortgages at the same time. Access your home sale proceeds: You can use the proceeds from your home sale as your next down payment. There’s no need to rush to sell. You don’t have to feel pressured to lower your listing price to sell your home faster.
Disadvantages of selling your home first
Temporary housing: Finding temporary housing before purchasing a new home can be stressful. Two trips: You’ll probably have to make two trips, which can be expensive. Tight purchase timeline: You may feel pressured to find a new home quickly.
Advantages of buying a house first
Spend more time finding the right place: Finding the right home doesn’t have to be so stressful or rushed, especially if you have specific needs. You only have to move once. No expensive storage fees or double moving costs. You have an old home: If something goes wrong during the home buying process, you can still live in your current home.
Disadvantages of buying a house first
Paying off two mortgages: You may end up paying two mortgages, which can be expensive, until you sell your first home. You may not qualify for a new mortgage. Your lender may not approve your next mortgage if you still have an existing mortgage outstanding. You’ll have less money for a down payment: If most of your money is going toward your current home, you may not be able to make a larger down payment or buy a more expensive home. Pressure to accept an offer: If you’re in a hurry to sell your home, you may feel pressured to accept a lower offer. Challenges of renting out an older home: If you decide to rent out your current home until it sells, you may face challenges as a landlord.
If you’re still unsure, talk to a real estate agent who understands your local market and can guide you based on current conditions.
Sell your home before you buy: Helpful tips
Consider a rent-back agreement
A rent-back agreement is a temporary rental agreement in which your old home is rented back from the new owner after the sale is complete. This gives you more time to buy your next home or close the sale if you’re already looking to buy. Rent-back agreements are also a good option so you don’t have to move twice.
Request an extension of closing date
You can request an extension of time when selling your home. This will give you additional time to find your next home and ensure there is little or no overlap between the end of the sale and the need to move.
Plan your temporary housing in advance
Whether you’re negotiating a lease, looking for a short-term rental, or living with family and friends, it’s best to decide where you’ll live before you put your home on the market.
Understand your purchasing budget
If you’re planning on using the proceeds from the sale of your home to finance your next home, it’s important to create a budget in advance. You may have a number you want to sell your home for, but it may not be your reality. Determine your budget range in advance and price your home accordingly.
Buying a Home Before Selling: Helpful Tips
Decide on financing options
Before you buy your next home, it’s important to decide how you’ll finance your purchase. If you can’t use the proceeds from the sale of your home, there are several ways to finance your next home purchase. Common financing options include tapping into savings, home equity lines of credit (HELOCs), and bridge loans.
use your savings
You may have enough savings to cover the down payment, making it easier to buy a new home before you sell. Keep in mind that you will also need sufficient funds for closing costs, additional fees, and moving costs.
Use a home equity line of credit (HELOC)
For many homeowners, their savings are tied up as “equity” in their current home. A home equity line of credit (HELOC) gives you access to home equity to finance your next home purchase. If you are eligible, we encourage you to consider this.
Use a bridging loan
A bridge loan is a short-term loan that covers the down payment until a home is built. Although some banks offer this loan, not all banks offer it and it can be difficult to qualify.
Consider home sale contingencies
By including a home sale contingency in your offer, you can back out of the home sale if your current home doesn’t sell. This means that in order to buy a new home, you must sell your old one.
Request an extension of leave
If you’re getting close to selling your old home, extending the closing period will give you more time. When you buy a new home, you will have enough time to coordinate the sale of your home.
rent out an old house
If you’re not at the stage to sell your home, consider renting it. Depending on market conditions, this could help offset the cost of owning two homes.
Frequently asked questions about simultaneous purchases and sales
Should I buy first or should I sell?
Whether you sell your current home or buy a new one first depends on your situation. Both options have their pros and cons, but understanding your financial situation, determining your schedule, and working with a skilled real estate agent can make the process much easier.
What happens if I sell my home but can’t find a new home in time?
If you’ve initially sold but don’t have a new home in mind, you can consider rent-back deals, short-term rentals, or staying with family or friends while you continue your search for a home.
How can I time my sale and purchase to avoid paying two mortgages?
To minimize duplication, you can:
Depending on the sale of your current home, negotiate contingencies in the sales contract. Request an extension of the closing period for your new home. If you temporarily need to make double payments, please use a bridging loan.
What if my home doesn’t sell as quickly as I expected?
If it takes a long time to sell your home:
Consider lowering your asking price. Work with your real estate agent to improve staging and marketing. Consider renting out your home temporarily to help cover costs.
Can I use my 401(k) to buy my next home?
You can withdraw from your 401(k) or take out a loan to buy your next home. However, using 401(k) funds comes with various penalties and strict repayment schedules. The best place to start is to consult a financial advisor.
Should I use the same real estate agent for both the sale and purchase?
Using the same agent simplifies coordination and negotiations, but if you’re moving to another city, a local expert in your new area may be more beneficial.
How do I make an offer on a new home without the proceeds from selling my current home?
You can include a contingency for the home sale, negotiate an extension of the closing period, or use a HELOC or bridge loan to temporarily finance the purchase.
