Buying & Selling a Home at the Same Time
Whether you decide to buy new home first, or sell your current home first, you should know your options!
Buying a new home and selling a current home at the same time can be stressful. Selling first may make you feel "homeless" and rushed. Buying first may involve two mortgages. So let's review each scenario.
Buy Your New Home First
- Make an offer on a home with a contingency to sell your current home first; then list your current home for sale.
If you’re worried about selling your home too quickly and not being able to find another one to buy. Find your dream home first, and then make an offer with a “Buyer Contingency.” This means that your offer is contingent upon your current home selling.
- Use personal savings, a HELOC or bridge loan.
Most people can’t afford to pay for two mortgages at the same time, or buy a home with cash. If you don’t have that kind of savings, you can use a HELOC, which is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower’s equity in his/her house (akin to a second mortgage). Or a bridge loan, a short term loan lent by a bank to cover the interval between buying a new house and selling your old one. to cover the costs of purchasing a house while you’re still paying the mortgage on your old one.
- Rent out your current home to cover your new mortgage.
If you can find tenants who are willing to pay more than what you owe on monthly mortgage payments and what it costs to maintain your home, it makes financial sense to rent out your current house and purchase a new one. The downside is that you’ll need to have a down payment saved, and being a landlord comes with a lot of responsibility.
Sell Your Home First
- Put in an offer on a new home with a settlement contingency
As soon as you put your home on the market, start looking at places to buy, but don’t make an offer on any of them until you’ve accepted an offer on your current home. If you’re in this situation, it’s important to know exactly what you want to buy so you can make an offer as soon as you find it. When you make the offer on your new home, you can include what’s called a “Buyer Contingency” This means that your offer is contingent on your current home selling by a specified date. If it doesn’t sell by that date, you can cancel.
- Sign a rent-back agreement with the owners of your new home
A rent-back agreement is when the buyer allows the seller to stay in the home for an agreed-upon period of time, in exchange for rental payments. If you negotiate for this when you sell your house, you can stay in your home while you search for a new one; you just have to pay rent to the person who bought your house. Warning: this may reduce the number of offers on your home.
- Find a temporary rental to live in while you search for a home
If you can’t get a HELOC or Bridge loan and need the money from the sale of your home to buy a new one, this is a good option for you. You can sell your home and move into a rental while you search for your dream home. This is a complication, but it allows you to make an offer on a home without a Buyer Contingency.
As experienced REALTORS, we know what your options are and how best to make use of them. If you have need or want to buy and sell at the same time, we can coordinate the entire process for you to make it as smooth as possible. There are a lot of moving parts in these situations, but having the right professionals on your side makes all the difference. Contact Us and We'll Get This Done for You!