Buying and selling a home at the same time is all about careful planning and a little bit of luck. While there are many moving parts involved in both transactions, there are strategies you can use to help align the processes and aim for a smooth transition—potentially even closing on both properties on the same day.
Here’s a guide to help you navigate buying and selling a home simultaneously:
Analyze the Housing Market
Your local real estate market is one of the most critical factors in timing both transactions. Whether you’re moving across town or the country, understanding the conditions of each market will help you anticipate how long it might take to buy or sell. Markets vary widely, and knowing both dynamics can be crucial to timing.
What is a Buyer’s Market?
In a buyer’s market, more homes are available than buyers, making it easier to purchase a home but potentially more challenging to sell your current one. In this scenario, sellers are often more open to accepting offers contingent on selling your existing home, giving you more flexibility.
What is a Seller’s Market?
In a seller’s market, demand exceeds supply, which means homes sell quickly, but finding your next home could take longer. In this case, ask the buyer of your home for a rent-back agreement, allowing you to stay in your current home for a short period after the sale closes to give yourself time to secure your next home.
Work with a Skilled Real Estate Agent
Navigating both a home purchase and sale at the same time can be complex. A knowledgeable real estate agent will help you price your home correctly and guide you through the intricacies of timing, negotiation and strategy for both transactions.
Setting the Right Listing Price
A crucial role of your agent is to determine the best price for your home. The goal is to sell your property within the desired timeframe while securing enough equity to make your next purchase. A well-priced home is essential for keeping everything on track.
Interview Agents Before Choosing
Selecting an agent with experience buying and selling in your area is essential. Take the time to interview several agents to ensure you’re working with someone who understands the local market and can handle the dual complexity of your transactions. Using the same agent can streamline communication and negotiations if you buy and sell in the same area.
Know Your Finances
Once you’ve chosen your agent and understand the market, it’s time to clarify your financial situation. Consult with your mortgage lender and financial planner to determine what’s feasible, including how much equity you have in your current home, your liquid cash situation and the loan options available.
Calculating Your Home’s Resale Value
A critical step in understanding your finances is knowing how much your home is likely to sell for. Consider getting a pre-inspection to identify any repairs or concessions you may need to address before selling.
Understanding Your Home’s Equity
If you have a mortgage on your current home, figure out how much equity you’ve built. Equity is the difference between the market value of your home and what you still owe on the mortgage. Remember that the equity will not be accessible until the sale is finalized, so you may need to explore other financing options if you plan to buy before selling.
Buying Before Selling: Options and Strategies
If you decide to purchase a new home before selling your current one, there are several approaches you can consider:
- Make an Offer with a Sale Contingency: First, focus on finding your new home. Your offer is contingent on the sale of your existing home. Buying before selling works best in a buyer’s market, where sellers are more likely to wait for you to sell.
- Request an Extended Closing: If you’re confident your current home will sell quickly, you might negotiate an extended closing period on your new home to give you time to finalize your sale.
- Use Savings for the Down Payment: If possible, you can dip into savings to cover the down payment on the new home and then sell your current one.
- Home Equity Line of Credit (HELOC): This option allows you to borrow against your home’s equity to pay down your new home. You can pay it off once your current house sells.
- Bridge Loan: A bridge loan is another option for financing the down payment, but these loans can be more challenging to qualify for.
- Rent Your Current Home: If you’re not rushing to sell, consider renting your home. Using your house as an investment property allows you to generate income while transitioning into your new property.
Pros of Buying First:
- You’ll have a home ready to move into right away.
- You only move once, avoiding storage or temporary housing costs.
- You can take your time finding the perfect property without pressure.
Cons of Buying First:
- You may feel rushed to sell, possibly settling for a lower price.
- Contingent offers are less competitive in fast-moving markets.
- Managing two mortgages or rental responsibilities can be stressful.
Selling Before Buying: Steps to Success
If you prefer to sell your home first, here’s how to make it work smoothly:
- Make an Offer with a Settlement Contingency: In this scenario, you wait for an offer on your current home before actively searching for your next one. You then make your offer contingent on the sale of your home, which can help reduce risk.
- Find Temporary Housing: Selling first gives you more flexibility in choosing your next home, but you’ll need a temporary place to live during the transition.
- Sign a Rent-Back Agreement: In a seller’s market, you might ask the buyer to rent your home back to you briefly, giving you extra breathing room to find a new place while still accessing your equity.
Pros of Selling First:
- You’ll know how much equity you must pay for your new home.
- You can easily roll that equity into your next purchase.
- You eliminate the pressure of juggling two transactions at once.
Cons of Selling First:
- You may need to move into temporary housing.
- Moving twice and storing belongings can increase costs.
By carefully evaluating your market, working with a trusted agent and understanding your finances, you can successfully manage the complex process of buying and selling a home simultaneously.
