Juggling the sale of one home and the purchase of another simultaneously can feel overwhelming, but with proper planning it can be done. We put this guide together to help you understand the factors and options available to help streamline the process as you work with your mortgage lender and real estate agent to close on your new home while selling your current home.
Deciding to buy or sell a house first
In an ideal situation, you’d close on your new home a few days before finalizing the sale of your old one. But hold-ups are common, and market fluctuations are unpredictable, so it’s realistic to expect one or both sales to lag.
If you sell your home before you’ve closed on your new one, you might not have anywhere to go. If you close on your new one before you sell, you might end up with your house sitting on the market for some time while you pay two mortgages. While both situations are undesirable, you’ll have to anticipate one or the other based on your personal situation and the current housing market.
To begin, it’s helpful to know how much equity you have in your home so you can estimate a reasonable down payment for the house you’re buying and better understand what houses you can afford. The market is usually more favorable to either buying or selling a home (called buyer’s and seller’s markets, respectively), so at the very least you can try to predict which of the two sales will go faster. From there, it might make sense to buy first then sell or vice versa.
Selling in a buyer’s market
A buyer’s market means homes are priced low and moving slowly, so buyers have an advantage. In a buyer’s market, a home can sit on the market for weeks or months (or even longer) before selling. If you buy a new home and then your old one doesn’t sell quickly, you’ll have to make payments on both in the interim.
Consider these tips if you’re selling first in a buyer’s market:
- Price your home correctly. If you’re looking to sell quickly, have your home appraised and offer a reasonable, fair price.
- Consider renting after you sell. You can’t know for sure how long it'll take to find a new place, so consider moving into a temporary apartment or rental house after you sell your home. This will give you time to shop around for available homes to purchase without feeling rushed.
- Ask family to help out. If you live near family or friends who can put you up, consider putting your belongings into storage and moving in with them until you find a new place. Of course, this is only an option if you feel like you and your loved ones could handle a potentially extended period of time in close quarters.
- Locate multiple suitable homes. Keep your eye on the available homes in your desired area, and keep a running list of suitable options.
Buying in a seller’s market
A seller’s market means homes are priced high and move quickly, so sellers have the advantage. In a seller’s market, homes sell quickly, especially when they’re priced reasonably. This is a great scenario for sellers but can be difficult if you’re also competing as a buyer while trying to purchase a new home.
Keep these tips in mind if you’re buying first in a seller’s market:
- Make your house attractive. In order to ensure nothing stalls your current home from selling, work on making home improvements with the best return on investment (ROI).
- Understand you may have to settle for less. If you buy first and have difficulty selling your existing home, you may end up settling for a lower offer than you originally expected. This can put you in a tough position if you purchased an expensive new house counting on the income from your sale. Keep this in mind when budgeting.
- Set a budget that assumes your home won’t sell quickly. If your home doesn’t sell right away, you’ll need to be able to cover two mortgages plus interest and upkeep on both properties.
- Find a mortgage lender with competitive rates. Finding a mortgage lender who can give you low interest rates is your best option financially. Work with a lender who specializes in the types of loans you qualify for, including FHA, VA and USDA loans. You may need to put less money down with an FHA loan, for instance, and refinance later to make sure you have enough money in savings to cover costs until you sell your house.
Ways to make buying and selling a house easier
As much as we’d like it to, the timing of buying and selling a house doesn’t always line up perfectly. If you’re concerned with financing or the timing of the process, consider the following tips.
- Make a contingency offer
- A contract contingency lets you request that the new home contract not be completed until your house sells. While this can be risky if there are other non-contingent offers to purchase the home you want, this strategy can work well in a buyer’s market.
On the flip side, if you have an offer on your home and haven’t secured a new place yet but feel you’re close to making an offer, as the homeowner you can request to extend the closing date of the house you’re selling. This will give you more time to find the right place.
- Get a bridge loan
- Another option if you need to buy your new house before you’ve sold your existing home is what’s referred to as a bridge loan. A bridge loan is a short-term loan that can be used to cover the down payment on your new home until you secure longer-term financing (like the money from the sale of your old house). Keep in mind that bridge loans can be more expensive and harder to qualify for than conventional financing because they require greater risk on the part of the financier.
- Rent out your current home
- If you buy first and have trouble selling, consider renting out your home instead. This can cover some or all of your home loan payment, and if you choose to offer it with a short-term lease you can still keep it on the market to sell.
- Stage your home to sell
- Staging your home is a good idea regardless of whether you’re buying or selling first. The main purpose of staging is to give potential buyers a way to visualize how your space can be used. You can hire someone to stage your home for you or you can take a DIY approach. Here are some ideas:
- Play up your outdoor living space. Outdoor living spaces are gaining popularity among homebuyers. Adding furniture, outdoor heaters and small landscaping details can make a big difference when potential buyers visit your house, especially if you live in a warm climate.
- Set a scene. Create a scene in each room to provide a narrative for your house. Set up a board game in your den or create a reading nook in the master bedroom. These small but important details can help homebuyers visualize themselves using your space and make it easier to sell your home quickly.
- Get rid of clutter. This is by far the most important thing sellers can do to entice potential buyers. Recognize that people who view your home will go through your things. They’ll look in cabinets and closets, and if they see tons of clutter, they could determine there’s not enough storage space. Organize your clutter using closet organizers and get rid of stuff you don’t need. If you still have too much stuff for your house, look into renting a temporary storage unit while your house is on the market.
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