How To Buy A Home While Selling Your Own
Buying a home? Selling a home? Both at the same time? First of all, good luck! Needless to say, this is a complicated process with lots of moving parts. In order to navigate all the details, let’s look at how to buy a home while selling your own. We’ll be looking at what you need to know, different financial options to consider, what to expect, and how to make things run as smoothly as possible.
Know Your Markets… Both Of Them
Understand what’s happening in the real estate market, and why is the first step.
If you’re buying or only selling a house, it’s important to know the market. However, when you are dealing with two houses at the same time, it’s even more important to be aware of both of the markets, so you know what to expect on each end and can try to match timing as best as possible. If your old home is in a buyer’s market and your new home is in a seller’s market, then you know you have to list your old home earlier than expected. You want to be as prepared as possible so that you aren’t left waiting for your old home to sell, or in the opposite scenario, finding a temporary place to live while you wait for closing. Both of these situations will cost you extra money so it is important to try to, as much as possible, synchronize buying a house while selling your own.
Should You Sell Or Buy First?
Selling or buying first is an important question, and the answer to it will depend a lot on your situation. Let’s look at both scenarios. If you sell first, it will be easier to get a home loan, because you will already be in a better financial situation. However, you will probably need to find a temporary place to live, which will cost you money, and you will have to move some of your stuff twice. On the other hand, buying a home first will make the actual move easier, as you can take your stuff straight there. However, that can also be difficult, because you don’t know when your old home will sell or how much it will sell for. In addition, it can be harder to qualify for a loan because your finances are tied up. Like, really tied up. You will be paying the monthly mortgage on two homes. It is a difficult question, and much depends on your urgency to move, as well as your financial situation. Make sure you know all of this ahead of time and have planned out your options.
Plan your schedule carefully and be flexible when you buy and sell real estate at the same time.
Remember that this is quite a complicated process. There are a multitude of variables involved that all need to be taken into account along every step of the way, including the buyers and sellers you are negotiating with, their lawyers, inspectors, appraisers, and unforeseen events for everyone, to name a few. Closings can easily get delayed for months, because of personal issues, newly found defects to the house, or changes in work situations, and everything will be less stressful for you if you haven’t boxed yourself in with timing (if you have that luxury). Even if you have your preferred plan, be prepared with back-up plans if things change and you end up having to pay for both mortgages or renting a place for longer than expected.
Consider Financial Options
Luckily, there are a few different routes you can go to make things go smoothly, depending on the flexibility of your buyers and sellers. Go over these options with your agent if you want to buy a home while selling your own.
Know your financial solutions can relieve some of your pressure.
- Lease-back: in a lease back, you rent your old home back from the buyers for a certain amount of time, which can be up to 90 days, and a prorated mortgage rate. Naturally, this depends on the circumstance of the buyers, and may not always work out for them. If it does, however, it is a simple solution to finding another place to live and can save you a lot of trouble while allowing you to sell before you buy. If you need to buy a home while selling your own, try to feel out potential buyers and work this option into negotiations.
- Contingency: not always the most appealing option, but something that can be discussed, is the buyer’s offer contingent on the sale of their prior home. This is often a turn-off to sellers, but again, depending on their desperation level, yours may be the only offer they have and they have to take a chance on it. This ensures that you won’t be left with two homes to pay for and allows you put your old home on the market while making offers.
- Bridge Loan: this is a short-term loan that is meant to “bridge the gap” between the sale of two properties. The bank will loan you the money necessary to purchase your new home, with the expectation that you will pay it back once your old home sells.
Because buying and selling is not an exact science, it is important to prepare yourself for best and worst-case scenarios. Having back-up plans and “expecting the worst” is always a good way to be prepared for any curve balls, but more importantly prevent you from making any hasty or anxious decisions. If something falls through and you find yourself needing to move quickly, you may have to take a big hit to your selling price or settle for a less-than-desirable house to move into if you don’t have a back-up plan. To be safe, it is best to plan for the event that you will have to rent a place for the short-term, so you are not caught off-guard and rushed into an emotional decision.
Managing the transfer of one home is hard enough, but when you need to buy a home while selling your own, it can be extremely stressful. Make sure you have back-up plans and know all your options. It is important to have an experienced realtor who can walk you through everything you need to know to make this life transition as smooth as possible for you and your family. If you are in need of an agent, contact Delphine Nguyen of the Delphine Team with Baird and Warner, to help get you and your family from one home to another as smoothly and easily as possible.