Buying and Selling A Home at the Same Time

September 22, 2023, By: Susan Kadilak

 


 

Navigating the real estate market can be a daunting experience, especially when you're both buying and selling a home simultaneously. The idea of "trading up or down" – selling your current house to buy a bigger or smaller one – is a common scenario, but it can be tricky in the current market. If this is something you’ve been thinking about, you're not alone. Below, I’m sharing some of the items we recommend that you consider when deciding whether or not this is the right move for you.

 

Click below to watch the video!

 

Assess your financial situation:

 

 

Schedule a home valuation with a trusted Realtor that will tell you exactly how much cash to expect from the sale of your current home, after all expenses. This will give you an idea of how much you will have available to invest in your next home.

Check Your Credit Score: A good credit score can secure favorable mortgage rates, making the entire process more affordable. If there are any credit issues that need to be addressed, it’s best to resolve them before starting the process.

Get a pre-approval: Based on your expected net cash from your home sale and your credit score, how much are you comfortable spending on your next home? Knowing what your budget looks like will help you decide whether or not a move is worthwhile.

Account for all expenses: Ensure you have enough cash on hand to cover all costs, including any overlapping mortgage payments, moving expenses, and unforeseen costs related to your new home.

 

Should you buy first or sell first?

One major factor when deciding whether to buy or sell first is understanding the current real estate market dynamics. Logistically, it’s always easier to shop first and know that you have found a new home before selling your current one, but that isn’t always feasible.   

 

 

If you want to buy your new home first:

In a Seller’s Market, homes are typically selling quickly within a short period of time, so it’s unlikely that you’ll be able to get an offer accepted on your dream home contingent upon listing and selling your current home. If you decide you’d like to buy before listing your home, there are options available to consider such as a bridge loan, or taking out a home equity loan on your current property to use as a down payment on the next home.  Or, you may have the cash on hand to use as a down payment for the next home, but the tricky part here is ensuring that you’re able to qualify with the bank to carry the payments on both properties for a period of time. I recommend planning for 6 months of double payments as a worst case scenario.  

Even if you qualify to carry the payments, are you comfortable doing so? I’ve had clients who went ahead with the double payments, but it added a lot of stress to the home selling process.

 

In a Buyer’s market, or even a neutral market, it’s much easier to find a seller willing to accept an offer contingent upon you listing and selling your current home. Or, if you’re considering new construction for your next home, there’s often plenty of time to get your home sold while the new one is being built, so you don’t have to stress about where you’re going. Depending on your particular situation, buying first can be a great option

 

Selling First:

In a Seller’s Market, selling first may be the wisest financial option. You’ll know exactly how much money you’ll have on hand before committing to a new property, and you’ll be in a great position to negotiate the terms of your sale.

 

Before listing your home for sale, I recommend doing some window shopping with your agent to make sure that you’ll be able to find a home that works for you within your budget. Once you’ve decided to go ahead with the move, here are some things to consider to make the process less stressful:

  • Consider temporary housing: Have a back up plan, consider a rental or living with family for a period of time between selling your current home and moving into your new one.
  • Ask for a leaseback: This means that you’ll be able to live in your home for up to 60 days after selling it, to give you some breathing room between moves. In some cases, you, as the seller, would pay rent to the new owner during this period.
  • Ask for an extended closing: Some closings happen as quickly as 14 days after an offer is made, but you can ask for 60 or 90 days before closing to give you more time to go house hunting.
  • If you’re concerned that you won’t be able to find another house and will end up homeless and living under a bridge, consider listing your home “contingent on finding suitable housing”. This means that once you have a buyer for your home, you’ll have a certain amount of time to find your next home. You’ll be able to make offers with your current home already under contract, which puts you in a much stronger position to get an offer accepted and line up the closings to happen on the same day. And, if you’re unable to find a home you’ll be able to back out selling your home under the termination clause you’ve agreed to.