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How to Sell and Buy a House at the Same Time

November 23, 2021

How to Sell and Buy a House at the Same Time

If you're already a homeowner, the idea of purchasing another house may be overwhelming. Do you sell your home first and live somewhere temporarily as you search for a new one? Or buy a new one first and pay for two mortgages simultaneously until you can sell your current home? Can you manage to do both of these things at once?

Luckily, when it comes to selling and buying a house at the same time, you have several options to choose from, and the best one for you depends on your budget, your property, your personal situation and the local market where your house is located. In this guide, you'll learn what you need to know when selling and buying a house simultaneously.

Know the Market

When it comes to the process of selling and buying a house, one of the most important things to get right is the timing — and the timing depends largely on the housing market in your area. Here are some of the strategies you should take in both a buyer's and seller's market.

1. Tips for a Buyer's Market

If you're in a buyer's market, selling your house may take longer, so it may be best to wait to make an offer on a new home until you have a contract with a buyer. One benefit of being in a buyer's market is that you will often have more negotiating power to include a contingency that you will only buy the new house if your current home sells. This provides many buyers with more peace of mind.

2. Tips for a Seller's Market

In a seller's market, you should ensure your house is ready for the market and staged to sell. You may want to get your finances in order, which will allow you to make an offer quickly if you find a house you want to purchase. When the market favors sellers, it's less likely you'll be able to move the closing date or include contingencies in your offer, especially if the seller has to move soon. However, if the house you're selling is correctly priced and well-staged, it is likely to sell more quickly. A seller's market also allows you to be more choosy about the offers you want to consider and lets you pick ones with fewer contingencies.

Tips for Buying and Selling at the Same Time

As we mentioned earlier, there are three basic courses of action when it comes to buying and selling a home around the same time — buying first, selling first and doing both simultaneously. Here are our top tips for each option:

1. Tips for Buying First

Let's say you found the home of your dreams. It has everything you've ever wanted and fits your budget — but your current home still hasn't sold. You may decide you can't pass up the opportunity to buy this special property.

Traditionally, most people would sell their homes before buying a new one, but there has been a shift since COVID-19. This could be due to several factors, including the increased demand for space. It could also be that, since homeowners have been spending more time in or near their home, they realize they're not too fond of their surroundings and neighborhood and want to make a change quickly without having to wait for a sale.

Here are some tips on how to go about buying first while keeping your risk and stress at manageable levels.

Determine if It's Feasible Financially

You can sell your house if you have a mortgage, but you'll want to examine your monthly disposable income and cash reserves before buying a new home. Decide if buying first is a viable option for you by asking yourself these important questions:

  • Will you be able to afford to pay two mortgages at once?
  • How long do you have before being unable to pay both mortgages?
  • Do you have sufficient assets you can use for a downpayment?
  • How much money do you have available for a downpayment after accounting for paying for both of your mortgages for the number of months in the worst-case scenario?

If you live paycheck to paycheck, this isn't an option you should consider. However, if your income is strong and your monthly debts are low, you may be able to use this option.

Speak With a Reputable Agent and Lender

We also recommend speaking with a trustworthy real estate agent and lender. Once they are aware of your situation, they can determine what your current home will likely sell for and how much you can spend on your new house. They will also examine your debt-to-income ratio and calculate whether you can be preapproved for your loan before you sell your current house.

Think About a Bridge Loan

If your available assets are insufficient for a downpayment, consider getting a bridge loan. This short-term loan taps into your current home's equity to obtain the needed downpayment to complete your purchase. This option is only viable if you feel comfortable paying two mortgage payments for as long as six months or a year, which is the regular bridge loan term.

Make Offers That Satisfy Both the Seller and the Buyer

If you feel it's too much to carry multiple mortgage payments, consider making a contingent offer, which has a condition that you'll buy only if your current house sells. If not, the contract says you won't lose your earnest money.

This option is appealing because it eliminates your financial risk, but the downside is that it weakens your offer. If you're in a seller's market, making a contingent offer will not put you in a powerful position. You're more likely to succeed with this type of offer if it's a buyer's market or the home you want to buy is less in demand.

Another available option is solidifying your offer with a significant amount of non-refundable earnest money, which the seller will hopefully consider a sufficiently good incentive to hold out a bit longer until your home sells.

Think About Finding a Cash Buyer

If you choose to purchase a new home first and sell your current home later, you will want to sell it as soon as you can to keep from paying two mortgages for extended periods. We recommend working with a real estate investment company or instant homebuyer to do a cash sale, which usually is much faster than the regular listing process. However, it's important to know that doing this means the offers you get may be considerably less than what you'd get on the open market.

2. Tips for Selling First

You don't need to sell your house before buying another, but it might be the best option if you're not comfortable being responsible for two mortgages at once. This route is safer financially, as it will free your equity up to use for your downpayment. It will also lower your ratio of debt to income and increase your chances of being preapproved for a loan.

Before your put your home on the market, make sure to do the following:

  • Declutter and clean: In every room of your home, get rid of all your unused or unwanted items, then thoroughly deep clean. Wipe your windows down, clean your floors and carpets, detail your bathrooms and kitchen, then hit any areas you may have missed, like lights and baseboards.
  • Proactively make repairs: Instead of waiting for when a prospective buyer orders your home to be inspected, you can begin making needed upgrades or repairs to speed up the sale process down the road. You may even want to order an inspection yourself before you put your home on the market.
  • Prepare your home for showings: If possible, you may want to move certain items into storage, allowing you to stage rooms to be shown. Buyers tend to like homes that are free of clutter, organized and open.
  • Work with a reputable agent: If you would like your home to sell quickly and smoothly, you will want to work with a trusted real estate agent who knows the local market and what buyers are looking for. You should also look for one who has experience marketing your kind of home.
  • Price your home right: If you price your home too low, you could undervalue your house, giving you less cash to use for your next downpayment. However, if you price it too high, you may discourage buyers who would have otherwise made an offer on your home. We recommend pricing your home in line with — or a bit lower — than market value so you can get multiple offers. Then, choose the offer that's most dependable and has the fewest contingencies.
  • Plan for your gap period: Selling your home before search for another eliminates the risk of financially overextending yourself, but it also means you will have to find temporary housing until you get your next home. One way to do this is to enter into a post-closing occupancy, or "back rent" agreement, with the buyer of your current house. You could also rent a property before you decide on your next step. We recommend signing a month-to-month lease on a place with enough space to store all your belongings.

How to Maintain Your Sanity When Buying and Selling at the Same Time

Selling a home can be one of the most stressful experiences in modern life, and trying to purchase a new home at the same time compounds this stress. To help you manage your stress in this situation, try these tips:

  • Price your current home reasonably.
  • Determine your buying criteria clearly.
  • Have a specific plan of action.
  • Hire a real estate agent with experience in dealing with both transactions simultaneously.
  • Ensure your house is ready for showing to buyers.
  • Be sure you have enough money on hand for any unexpected expenses.
  • Consider solutions that allow you to trade your house for another, similar to how a car may be traded in for a new model.

Choosing a Real Estate Agent

Listing your house with an experienced real estate agent will greatly reduce your stress during this process. A real estate agent will always be there to answer any questions you might have to help you solve your problem. Here are some other ways that a real estate agent will help you:

  • Stage your home and figure out what changes to make
  • List your home and find buyers
  • Manage any open houses
  • Show your home when you're away
  • Market your home by networking with other agents

When searching for a good real estate agent, consider these tips:

  • Find a licensed agent: Real estate agents must be licensed in the state where they work. To find out whether an agent is licensed, check your state's real estate commission website.
  • Find a knowledgeable agent: Good agents should know your area's real estate market well. An agent with experience can give you a good idea of what the current market is like, let you know how long it generally takes to sell homes in your area and understand whether they're selling above or below the asking price.
  • Establish how you prefer to communicate with your agent: When buying and selling a house, fast communication between you and the agent is essential. Let your agent know your preferred method of communication, whether it be phone calls, emails, text messages or a combination. Make sure the agent knows how you prefer to communicate.
  • Work with a person you can be honest with: Selling a house is an enormous financial decision and involves lots of emotions as well. For this reason, your agent needs to be someone you feel comfortable speaking honestly with — and one who can be honest with you as well. Pick an agent who understands your needs and will prioritize them.

Financing Options

Most people cannot afford to purchase a new home without first selling their old one or doing it simultaneously. If you buy a new home before selling your current one, you may have trouble coming up with your downpayment. Before beginning the financing process, make sure you know what financial choices you have. Here are two common options:

  • Home equity line of credit: One way to get the money is through a home equity line of credit (HELOC), which uses your home's value as collateral for your loan. When taking out a HELOC, the funds can be used for the downpayment for your future home. Then, when selling your house, you can repay the HELOC using the proceeds.
  • Bridge loan: As the name suggests, bridge loans help you bridge the gap between now and when your home sells. This personal loan type is repaid whenever you close on your old home.

Find the Perfect Home With SK Builders

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