Buying a home is a huge endeavor. The paperwork, the deadlines, the research. It can all be stressful. Now, couple that with selling your home at the same time, and it can feel very overwhelming. But, you can do it—with the right help from an experienced, professional real estate advisor.
It would be awesome, of course, if you could orchestrate buying and selling on the same day. But many times, that’s just not realistic. So, the very first step is to determine whether you can purchase a new home before you sell your current one. You can do that by talking with a lender. If you can qualify for a new mortgage while still holding your current one, you have the luxury of choosing whether you want to sell or buy first.
If you must sell your current home to qualify for a new home, you know what road you are on.
Logistically, selling first is usually the best way to go.
When you sell your home before buying a new one, you know how much money you will get from the sale. You will have more cash to sweeten the purchasing offer. Of course, it’s easier to get a new mortgage when you’ve already sold your home. And, you won’t be having to make two mortgage payments. But there are a few disadvantages to this approach.
If you sell without finding a new home, you may have to rent for a while. Yes, you’ll have to move twice and you will have to put your belongings into storage in the meantime. But, sometimes closing on one sale before starting another can be the least stressful option, as it takes pressure off the timing and gives you the time to find a home you really love.
If you buy a home before you sell your old one, you have plenty of time to find a home you really love and to move. It also gives you more time to get your home ready to sell. But, it’s hard to qualify for a new mortgage if you still have an active mortgage because your debt to income ratio will be high. And, of course, if your home doesn’t sell for a while, you could end up paying on two mortgages at once. So you could feel rushed or forced to accept a less-than-ideal offer.
If you buy a new home but can’t sell the old one, you can consider renting your old home out for a while. This would help you cover the mortgage payments while you move into your new home. Of course, now you are a landlord.
Research the Local Market
The state of the real estate market in your area is often the biggest factor in timing. Knowing what kind of market you’re in is important because the length of time it takes to buy and sell can vary dramatically depending on the local real estate scene.
In a buyers’ market, there are more homes available than people looking to buy. In this scenario, you’ll likely have an easier time finding a new home than you will selling your old home. A seller may be willing to accept a contingent offer, which means they agree that you will purchase the new home only once you sell yours.
In a sellers’ market, there are more buyers in the marketplace than there are homes available. If this is the case, your current home will likely sell before you are able to find a new home. If that happens, you can consider asking your buyers to allow you to delay the closing or to rent your old home for a short while (often 30 to 60 days) so you can find a new place.
In a hot market, though, you must be prepared for the possibility that the seller may receive multiple offers. They may not be willing to even consider special requests, such as contingencies or rent-back agreements, without attractive terms. You may have to offer a higher purchase price, for example. But, if you can negotiate it, such an agreement is typically more convenient than moving into a rental property and then moving again into your new home.
As a general rule, you want to sell first in a buyers’ market.
In a sellers’ market, you might consider buying first, provided that your property can indeed sell quickly.
What is the Worst-Case Scenario?
When buying and selling at the same time, the worst-case scenario is selling your home and finding there is nothing suitable in the market to purchase. However, this is not the end of the world. I know; I just did this myself! You will need to find temporary storage for your furniture and other large items, and you will need to pack for a temporary move. While having a double move is never pleasant, at least you have your home sold. You can relax a bit instead of feeling so much pressure to find a home and possibly purchase something you would regret later. Renting a place in between—or even camping out with friends or family—will allow you to search at a more comfortable space.
Work with an Advisor
Buying and selling at the same time can be complicated and at times overwhelming, so it’s helpful to have a pro by your side—one who can help you make smart decisions. An experienced real estate advisor will not only help you determine the right price for your home, but they’ll be able to talk you through timing, strategy, and negotiation as well as help you understand the differences among the contracts you will be comparing.
Even doing everything right, you may find yourself in limbo for a short period. Take heart! Most homeowners sell their homes, purchase new homes, and move without needing to rent. In fact, you would not believe how many times I have helped clients buy and sell a home at the same time.
You Can Do This
It is normal to feel a little nervous about trying to juggle so many balls at once. You are dealing with significant transactions here, and you are talking about pretty basic needs (shelter and comfort). Of course, you want it to go well. Fortunately, it usually does.
With a little preparation and a great advisor to guide you, it’s possible to minimize the stress of buying and selling a home at the same time. Know the market, know your options, and come up with a plan. You can do this.
And call me if I can help.