Tips on Buying & Selling A House At The Same Time
It is not uncommon to buy and sell a house at the same time, but it comes with many challenges. Here are some tips for navigating the process of purchasing a new construction home while selling your current one, and not losing your mind in the process.
So you found your dream home…
You found the Capital Region home you have been dreaming of, at the right price, and you feel like you just can’t pass it up. But what if your current home hasn’t sold yet? Maybe you haven’t even listed it? First, find out if it’s financially feasible. Look at your cash reserves and your disposable income.
First, ask yourself the following questions about finances:
- Can I afford to pay both mortgages, and for how long?
- Do I have assets to use as a down payment, and will it be enough?
- How much do I have available for a down payment after paying for both mortgages, for the number of months in the worst-case scenario?
For someone living from paycheck to paycheck, this option isn’t right. For those with a high income and low expenses, it’s probably manageable. Consult with your real estate agent and your lender about these concerns. Sometimes there is a possibility to get a preapproval for the loan before selling your current home.
If paying two mortgages isn’t an option for you, you can make a contingent offer, which includes a condition that you’ll buy only if your current home sells. It eliminates your financial risk, but it also weakens your offer. If the seller has another potential buyer with cash and no contingencies, they will prioritize them. Such a buyer will take precedence over even a higher offer with an inspection, financing, or any other contingency.
Consider the specific real estate market in the Capital Region community you are interested in. If demand is high and supply is low, a contingent offer may not be a good option. If it’s a buyer’s market or there is a low demand for the home you want, it may work.
Simultaneous buying and selling makes both transactions more difficult. If you don’t have a lot of cash on hand, it will be tough to come up with the money for a down payment while you still have equity tied up in your current house. A way out of this situation would be to do a cash-out refinance on your home, take a home equity line of credit, or sell some of your investments.
Some people are permitted to have only one mortgage at a time, so it’s hard to secure a mortgage on another property before selling the first one. Countless details and tough decisions can cause some severe headaches for the homeowners, especially in the case of relocation to different parts of the state. You must pay close attention to logistics — timing the purchase and the sale perfectly, negotiating on moving dates, and organizing belongings to get ready for the relocation.
If both your buyer and seller are in the same situation as you, trying to buy and sell a house at the same time, it can create even more problems as there are multiple moving parts and parties involved. That consequently leads to a higher chance for the deal to fall apart. Each of those parties has their real estate agents, inspectors, contractors, etc. You can easily see how any one cog in this massive machine can fail and derail the whole thing.
If you have found an ideal home with an attractive price, but you have a bit of competition, try to make the highest offer and come with some non-refundable earnest money as a sign of goodwill and seriousness to completing the transaction.
Once you buy a new home, you can move in and list your old house for sale. If it doesn’t sell soon, you can rent it out until the market improves.
Selling your home the right way
Selling your property before making an offer on another property is another way to go. It’s a financially safer route since you’ll be able to free up your equity and use it for a down payment. You’ll be reducing your debt-to-income ratio, and you will be more likely to get preapproved for the next loan.
There are many factors to consider when selling your home. Some are just out of your control, but some you can influence. Try to add value to your home before listing it by doing minor repairs and remodeling. It will improve the appearance and functionality of your house.
Invest some time and effort in staging your home before selling it for a better price. Declutter all rooms and do a deep cleaning. Don’t wait until your potential buyer requests a home inspection; start making necessary repairs and upgrades as soon as possible to help the future sale process and speed it up.
Move some furniture and boxes into storage; it will give you a better opportunity to stage each room for showings. Buyers like open spaces, organized areas, clutter-free rooms, and day-to-day functionality.
Set the right price
In competitive markets with multiple offers, your real estate agent will be a lifesaver. Their knowledge of local market conditions and buyer wishlists will work to your advantage. They can market your home the right way, help you get the best price, and speed the process up.
Don’t price your home too low and undervalue it, even in a rush. That will result in you having less cash available for your next down payment. On the other hand, pricing the home too high could deter potential buyers, stretching out the process too long. Price your home in line with the market value or slightly below, get multiple offers, and then choose the best one with the fewest contingencies.
Get ready for the relocation
Selling your current home before buying another one means you’ll need to secure temporary housing and relocate two times. It won’t be easy to get the youngest in your family ready once, let alone two times, especially if one of those is a long-distance move. So, start preparing mentally one time. Physically, you’ll manage everything with good planning and organization.
Choose a professional moving company to help you with packing and transport. Your loved ones can help by taking care of your young kids while you prepare everything. Keep in mind that long-distance moving requires ample time to organize. Coordinating a relocation when having to buy and sell a house at the same time is hard, so you need all the help you can get.
Live your dream life
To buy and sell a house at the same time can be one of most stressful processes in modern life. But remember – it’s doable. Many have successfully gone through the same process and now live happily in their dream homes.