Tips to Buy and Sell Houses Simultaneously
Are you wondering how to buy and sell a house at the same time? You are not alone, as many folks ask real estate agents how to pull off the house buy and sell simultaneously.
It’s not like you buy and sell houses every day, so a reasonable question to ask. It can be more of a challenge in a seller’s market where home inventory is scarce.
Selling your old home will be easy. It’s finding the new house that could be a problem.
Unless you are one of the rare homeowners with the financial ability to pay two mortgages at once, buying a home before selling your current home is not an option.
Given that you need to sell your current home to pay for a new one, you will need to prepare yourself for a certain level of uncertainty.
Even doing everything right, you may find yourself in limbo for a short period. Take heart, though. Most homeowners can sell their homes, purchase a new home, and move before renting temporary housing.
You would not believe how many times buying and selling a home at the same time occurs.
Trust me, after selling real estate for the past thirty-five years, it happens a lot! Since most people do not have the financial luxury of purchasing another home first, selling and buying often coincide.
For this reason, many wonder how to buy and sell a house at the same time.
How Selling And Buying a House Simultaneously Works
The home buying and selling process can be time-consuming, and there are few guarantees. Unless you have a highly desirable home and are willing to part with it for only a fraction of what it is worth, you will probably need some time to sell it.
The fact that you will need to spend time selling your home means that buying another home simultaneously is typically not a workable proposition unless you are willing to pay for both houses at the same time.
Even if you are willing to take on two house payments simultaneously, will lenders be willing to lend you money on both homes at the same time?
Unless you are very well off, with valuable assets to put up against the loan, lenders will probably not be interested in taking on the risk.
All of this means that you should expect to sell your current home before purchasing a new home. It may take some work and a little bit of faith, but you can do it.
Many other homeowners have done the same thing, and so can you.
Find Out Whether You Can Do a House Buy and Sell at The Same Time
The first step in buying and selling a house at the same time is to find out what you can do financially. It will be worth your time speaking to a mortgage lender to find out your options.
The mortgage lender will take a hard look at your financial situation, including current income and cash on hand for a down payment.
Mortgage companies will do thorough research to determine if you can afford to carry both mortgages simultaneously. The lender will also look at how long you will comfortably make both payments before it becomes a financial burden.
If you don’t have significant funds in reserve, selling and buying at the same time might not make financial sense unless you’re a risk-taker.
Home buyers ask real estate agents all the time how to buy a new house before selling their current house.
Use a Bridge Loan
In years past, a bridge loan used to be far more common. Many lenders no longer do them and instead qualify you for a new mortgage.
A bridge mortgage is a short-term loan used to bridge the gap between buying your next home and selling your old house. Some folks want to buy a house before they sell. You may not have enough money to purchase the next home in that circumstance. A bridge loan will be used to help buy your new place.
Typically, borrowers will mortgage 80 percent of both your current home’s value and the value of your new property. To qualify for a bridge loan, lenders will look at your credit score, debt-to-income ratio, how much equity there is in your current home, and your income.
With a lack of equity in your existing home, it will be challenging to qualify. Usually, bridge loans are structured, so you use the proceeds from your old to pay back the bridge loan. Bridge loans come with higher interest rates than traditional mortgages.
Getting a second mortgage is probably the best option.
Do You Qualify to Carry Two Mortgages?
Today, most lending institutions will look to see if you can afford to carry two mortgages simultaneously. You will need to qualify to pay mortgage payments on two properties. Getting two mortgages is almost always the best way to buy and sell a house at the same time.
Another option that some people look into is either a home equity loan or a home equity line of credit.
Let’s look at some of the less desirable house buy and sell options.
What About Selling Contingent on Finding Another Home?
Another avenue that some people try to take when buying and selling a home at the same time is to try to make selling their home contingent on finding another home.
Frankly, this is a HUGE mistake! When you make selling your home contingent on finding another home, your place, in theory, is NOT really for sale. A contingency clause like this will turn off a significant percentage of buyers, especially in a competitive market.
At the drop of a hat, you can tell a buyer – “sorry, I could not find a home; you are out of luck.” In a hot real estate market, there are very few buyers who will be willing to do this.
The Sale of Your Current Home Shouldn’t Be Tied to Finding One
Put yourself in the buyer’s shoes for a minute. You are out looking at homes and find the one you love. When reading the fine print in the listing, you discover that it says something like “subject to finding suitable housing.”
As a buyer, how can you begin to think about spending money on a home inspection, applying for financing, hiring an attorney for contract review, etc., if, in fact, you really might not be getting the house? Who wants to throw that kind of money away?
More importantly, what if the buyer has a home under agreement with a closing date that is coming up shortly? They will need to know if they have a home or not. Otherwise, they will be out on the street with nowhere to go.
If you are selling a home, this is a great way NOT to get top dollar for your home. Any excellent real estate agent will tell you that getting top dollar for your property is all about supply and demand. The more potential buyers there are for your home, the better.
With a clause like this inserted into your listing agreement, you will be eliminating tons of people who would even consider such an arrangement.
You will likely add more days on the market, which can lead to less money in your pocket.
What About Buying On Contingency?
Once upon a time, there was a way to make an offer to purchase with a home sale contingency. Essentially a home sale contingency allows buyers to make their purchase subject to selling their home.
It’s more common in a buyer’s market and non-existent in a seller’s market.
Buying on contingency was never that popular because it left sellers holding the bag when buyers could not sell their homes, which happened quite frequently.
The drawback to a home sale contingency for a seller is losing complete control of the process.
How does the seller know the buyer will price their home correctly and do what it takes to sell the property? They don’t! The seller in this situation is at the mercy of their buyer doing what’s necessary. Often they don’t.
Today, it is nearly impossible to find a seller who will accept this deal. Why should they? There are lines out the door of willing homebuyers who can make a non-contingent offer.
While there are many common contingencies in real estate sales, a home sale clause is not one of them.
Do not expect to find a home seller willing to make a contingency deal with you. Although it is possible, there is no need to chase something so unlikely.
It is better to accept the reality of your current situation and do what most other homeowners do. Sell your current house, then buy another one as quickly as possible.
The #1 way of selling and buying a home simultaneously is to sell first and then buy.
Proof You Can Buy Before Selling Via Mortgage Pre-Approval Letter
Over the last thirty-five years of selling real estate, I have come across some folks that will try to pull the wool over the eyes of others.
They think they are smarter than the next guy, but in reality, they end up digging themselves a hole that is hard to get out of. What do you mean, Bill? When I represent a seller and get an offer from a buyer, I will first find out about the buyer’s current housing status. In other words, do they have a home to sell?
Sometimes a buyer will submit an offer with a pre-approval letter, but they have a home to sell in which they need the equity out of to close on their purchase.
Some of these folks think that by just submitting a pre-approval letter and asking for an extended closing date to give themselves time to sell their home, they have outsmarted everyone – WRONG!
When you receive an offer from a buyer who currently owns a home, you should always ask for language to be inserted into the pre-approval letter that says getting the mortgage is not subject to the buyer closing on their current property.
An experienced real estate agent will always make this request.
If the lender does not produce this language in the letter, I explain to the seller that they would be accepting a contingent sale. Ninety-nine percent of the time, the owner will say thanks, but no thanks! They will be grateful I have looked out for their best interest.
Taking The Right Steps to Sell a House Before Buying
The following steps are what most prospective buyers make when they currently own a home but want to buy another one. Having a proper game plan will allow you to buy and sell a home at the same time.
Use these tips for buying and selling a property in a similar time frame.
Spend Some Time Searching For Your New Home First
When you sell your current home, you want to find another house quickly and get it under contract. Given that you want to move soon, it is wise to narrow your search to specific areas and even particular types of properties before you list your current house.
Spend some time with your Realtor to discuss your desires, and get serious about finding where you will buy and what types of properties you are willing to make offers on.
Get comfortable with specific neighborhoods you like and scout out available inventory to picture yourself living in. You want to make sure there are enough available homes you like once your house goes pending.
List Your Current Home For Sale First When You’re Doing a House Buy and Sell
Now you take the plunge. Have your real estate agent list your home for sale. Just make sure you don’t list for sale before your home is ready.
Take the necessary time to make sure your home and mindset are well prepared for what awaits you.
Do what needs to be done to quickly make the sale happen and fetch the highest price for your home.
Whether that’s doing junk removal, putting things into self-storage, or home staging, your home’s appearance matters a lot.
Selling a home is a subject deserving of its own article. It is enough to say that you should find an agent you trust and listen to what he or she says carefully.
Here are some excellent home selling tips that are sure to increase your chance of selling for top dollar in the shortest amount of time possible.
When you get an offer, you can try to push back the closing date as far as the buyer will allow you to. The average time from an offer to closing is typically six to eight weeks.
The closing date, however, is always subject to negotiation. If the buyer really wants your home, they will probably be as accommodating as possible.
A buyer will give you a long closing to find your new house in the perfect world.
Finding an accommodating buyer will be far less objectionable than putting a disclosure on the purchase of finding suitable housing.
To sweeten the pot and get a more extended close date, you could also offer to pay the buyer’s rent until you buy a new home or give them a further discount on the price of your home.
Make an Offer on a Home
When you get an offer on your home, you can then make your offer on a home that you want. You will need to structure your dates in the contract to have as limited risk as possible.
For example, you will want to make your mortgage contingency follow your buyer’s mortgage contingency date in the contract to purchase your home.
This way, if something happens, you will have an escape from the sale that prevents you from losing your earnest money deposit.
As long as both offers go through, you should be able to sell and buy very close together. The majority of homeowners manage to do this without even needing to rent temporary housing.
On most occasions, when buying and selling a home at the same time, the closing for both the buy and sell will happen on the same day. The home you are selling will close in the morning and the home you are buying in the afternoon.
What is The Worst-Case Scenario When Buying/Selling Concurrently?
When you are trying to sell your home and buy another in a short period, the worst-case scenario is getting your home sold and then finding you don’t have anything suitable to purchase.
While this does not sound all that inviting, it isn’t the end of the world. You are going to need a backup plan for a few things.
More than likely, finding temporary storage for your furniture and other large items will become necessary.
The other thing you will want to have a good handle on is how to pack your home for a temporary move. While having a double move is never pleasant, at least you have your home sold.
Instead of feeling so much pressure from finding a home and possibly purchasing something you will regret later, you can relax a bit.
Finding a short-term rental will allow you to search more comfortably at your leisure.
You Can Buy and Sell Houses With A Sound Plan
It is normal to feel a little nervous about juggling so many balls at once. You are dealing with significant transactions here, and you are talking about shelter and comfort for you and possibly your family.
Of course, you want it to go well.
Fortunately, it usually does. But even if there is a gap between your home sale and your new home’s purchase, you can always rent temporary housing or stay with friends or family.
A temporary place may not be ideal, but it will also probably be a situation you laugh about years from now when you are comfortable in the dream home you love.
Final Thoughts on Buying and Selling Houses
No doubt selling and buying houses in the same time frame creates a lot of stress. There is constant worry if everything is going to work out as planned. It almost always does, having been through the simultaneous buy and sell process so often in my career.
Having a sound game plan and working with a top real estate professional can help you achieve your goals. If you are in my area, please reach out as I love working with those who are buying and selling a home.
Additional Helpful Home Selling Advice
- Useful home selling real estate articles – see some great home selling advice from multiple real estate agents with years of experience.
- How to make your home more appealing – learn what you can do to make your house stand out when there is significant competition in the real estate market.
- Don’t make one of these 41 home selling mistakes that can sabotage the sale of your house. Avoid making some of these common home sale blunders.
Use these additional home selling articles to avoid getting stuck owning two homes. Buying and selling a house simultaneously can be done as long as you are prepared and have a great real estate agent in your corner.
About the author: The above Real Estate information on buying and selling a home at the same time was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for 35+ Years.
Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
Great post, Bill. This is often the case with repeat buyers in the same market. And it depends on how hot the market is on whether or not sellers will accept a contingent offer… a few years ago, heck ya! today? A little more tricky but not impossible. It so helps to have a local agent that knows the micro markets in order to determine whether a seller will accept one.
Kenny I have been selling real estate for twenty eight years and it has been rare a seller will ever consider a home sale contingency in a good market or bad. When you accept a home sale contingency you lose control of the process.
Hi Bill,
great post, very helpful tips for clients wanting to buy and sell at the same time. It’s true, I’ve been in the real estate business for over 30 years and situations like these come very often. And I have always advised my clients to sell first. You get the funds you need and then you buy a place you want. But the competition is so high nowadays and the inventory is so low that people are likely to miss out on properties they really like.
It’s hard as it is to buy and sell at the same time, but the current market situation in Toronto is making it even worse. What do you think is the better solution – to buy or to sell first?
Keep up the great work,
Penny
Penny unless my clients are independently wealthy, I always recommended getting their home under agreement first before moving forward on another home. Buying and selling a home at the same time can be very stressful that’s for sure.
Your advice to wait until you’re ready before your real estate agent lists your home for sale is a good idea. When choosing an agent, it would probably be a good idea to interview potential professionals beforehand. This could give you the opportunity to get to know them better and their communication style so you can ensure they’ll work with you and make sure your ready during every step of the process.