How to Buy and Sell a Home at the Same Time
Are you looking to move to your next home, but are not sure how to navigate the process of buying and selling at the same time? You’re not alone!
Many homeowners face this challenge, but with the right strategy and guidance, it can be done. In this blog post, we’ll explore the options available to move-up buyers and provide tips on how to make the process as seamless as possible.
From timing your transactions to assessing your financing options, we’ll cover everything you need to know to successfully buy and sell a home at the same time. So, whether you’re a first-time buyer or a seasoned pro, read on to learn how to make your next move a success.
Buying and Selling- What are Your Options?
If you’re a homeowner who has been thinking about upgrading or downsizing, the prospect of navigating the buying and selling process can be daunting.
Whether you’re wondering if it’s best to buy or sell first, or concerned about the cost and risks of owning two homes and having two mortgages at the same time, it’s understandable that you may have questions. Additionally, in a challenging market, you may be worried about the possibility of owning no home at all.
The good news is, with the right strategy and guidance, it is possible to successfully move to your next home. In this blog post, we’ll explore the options available to homeowners looking to move and provide tips on how to make the process as seamless as possible.
As a homeowner, the prospect of buying and selling a home at the same time can be overwhelming. Typically, there are two main strategies homeowners use when making this change: they either buy a new home before selling their existing one or sell their current home and move into a rental or temporary residence until they find a new home. These options can come with their own set of risks and inconveniences.
But don’t worry, there is another solution available that can help mitigate some of these concerns. In this blog post, we’ll delve into the traditional strategies of buying and selling a home simultaneously, and then explore a third option that can provide a more streamlined and less risky experience for homeowners.
Option 1: Buying a Home Before You Sell Your Existing Home
Buying a new home before selling your existing one can be a tricky financial maneuver, but it’s not impossible. If you’re in the market for a new home and happen to come across your dream home early on in your search, you may be wondering what your options are. In this blog post, we’ll take a look at two strategies that homeowners can use in this scenario.
Home Sale Contingency: The easiest way to handle this situation is by including a home sale contingency in any offer you make on a new home. This contingency allows you a set period of time to find a buyer for your old home before closing escrow on your new home. However, home sale contingencies are not widely accepted by sellers or listing agents. They prefer a solid offer without contingencies. In many cases, the seller may expect a higher price from a contingent sale offer.
Pros: There is very little risk to the buyer. If you are not able to sell your home and the purchase deal falls through, you might be out some fees for inspections or an appraiser and lost time and energy, but that is about it.
Cons: It’s rare that you will be able to convince the seller to accept your offer, and therefore you might lose your dream home to a better offer.
Bridge Loan or Home Equity Line: Another option to consider is getting a bridge loan or home equity line to deal with the financial strain of buying a new home before selling your old one. A bridge loan is a short-term loan that allows you to pay off the mortgage on your current home so you don’t have to carry that cost. When your home sells, you use the proceeds to pay off the bridge loan. A home equity line of credit (HELOC) also assumes that you have enough equity in your existing home to qualify for a new property. However, both options come with their own set of risks and potential drawbacks, such as high-interest rates, strict terms, and the need to have a good amount of equity in your existing home.
Pros: Being in a position to make a clean offer without a sale contingency clause, therefore vastly improving the quality and strength of your offer.
Cons: The risk associated with these scenarios are the typical risk you assume when you buy before you sell. If your existing home doesn’t sell or has a hard time selling then financially you may place yourself in a difficult situation.
Had you counted on your home selling at a certain price and if it falls short of that price you may need to dip into other accounts, take out a higher loan, or sell other assets to make up the shortfall.
The key here to limiting your risk is working with an agent who understands your home and your home’s market, and can give you an accurate assessment of the value, sales costs, and additional costs you might incur such as capital gains.
In either case your first steps are to always speak with a Realtor who is knowledgeable, they will help you understand the market and your home’s value. Ultimately a local real estate expert should be consulted to help you determine the best plan to achieve your objective.
Option 2: Selling Your Home Before Buying a New One
Selling your existing home before buying a new one can be a financially secure option, but it also comes with its own set of inconveniences and risks. One of the biggest challenges of this strategy is the potential for having to move twice within a short period of time. In this section of our blog post, we’ll take a look at the different strategies you can use when buying a new home after you’ve sold your existing one.
Renting Back Your Previous Home: Renting your previous home back from the new buyer can be a convenient option, but it’s important to note that most rent-backs are limited to 30 or 60 days, which may not be enough time to find and close on a new home. Additionally, it can be difficult to negotiate a rent-back that works for you and your family, especially if you have pets.
Pros: Financially more secure since you know what your existing home sold for. Ability to make clean and non-contingent offers while shopping for your new home. If found quickly you can complete just one move directly to your new home from your old home.
Cons: May not be enough time to find a new home, close escrow, and move into your new home. Depending on the market prices could be climbing fast making your new home more expensive than you planned.
Finding a Short-term Rental Before You Buy Your Home: This option allows you more time to find the right home, but it also means moving twice. Finding a short-term rental can be challenging, especially if you have pets, and you may end up having to sign a year lease that you’ll have to break.
Pros: You will have more time to find the right home. Ability to make cleaner and more competitive offers that sellers will consider.
Cons: Moving two times instead of one. Could be challenging to find the right rental that works for you and your family. The risk of the market appreciating while you are home shopping, and pricing you out of the home you were hoping to be able to afford.
Both of these options come with their own set of pros and cons, and can be risky in a fast-paced real estate market where prices are rapidly appreciating. That’s why many homeowners choose to stay in their existing homes or try to remodel.
- Matterport 3D Virtual Tour
- Schematic Floor Plan
- Professional HDR Photography
- Complimentary Home Staging
- Value-Add Home Updates
- Aerial Photography
- Drone Footage
- Property Video
- Property Webpage
- Email Marketing
- Print Marketing
- In-House Design Services
- Project Management
- Preferred Contractors & Vendors
- In-Depth Construction Knowledge
- Open Houses
- Syndication to 100’s of Websites
- Twilight Marketing Photos
- Property Inspection Management
- Home Security and Monitoring
- Strategic Pricing Knowledge
- Social Media Advertising
- Offer Presentation & Negotiation
- Personal Disclosure Review
- Transaction Management
Now there are other solutions out there that offer more convenience and are less risky.
These solutions allow you to buy the new home without taking out a HELOC or bridge loan, and offer you the convenience of shopping for your new home while you are still living in your existing home.
Let me explain how these options work so you can understand the pros and cons.
Getting a Direct Cash Offer on Your Home:
This is the simplest solution that will allow you to sell your home right before you purchase your new home, releasing the proceeds from your home to be used as a down payment on your new home.
The sale would be timed after your offer to buy your new home has been accepted. Also, this option clears any loan you had from your previous loan enabling you to maximize your purchasing power.
This option will also provide you with the option to remain in the home you just sold for up to 30 days after the close of escrow so that you can move directly into your new home.
Prior to buying your new home, we will have your home appraised and estimate its current market value. We will need to have an inspection done on the home to make sure there are no major defects and to assess the condition and costs involved in repairing the home.
Once the property’s market value has been assessed you will be eligible for a direct cash offer. A direct cash offer will be around 10-15% less than the market value. One of the advantages of a direct cash offer is you will not need to pay any commissions but will be responsible for the title and escrow fees when you close which can be around .5%.
The pros of this option are its simple and has very little risk. You can close escrow quickly in 8 days or less. You will be able to remain in the home which you have just sold for 30 days after closing to allow you to move into your new home.
Also, you will have the freedom to use any lender for your new purchase. You’ll save costs without having to pay commissions and don’t need to go through the costs and process of repairing, updating, and staging your home to sell it.
Lastly, you will avoid the traditional sales process which can involve weeks of showings, open houses, and potentially risky escrows.
The downside is you sell your home without it going to market, and could potentially be receiving a lower offer than what you could have received if you listed the home.
Trade-In with Sale Price Guarantee:
Similar to the option above, but instead of selling before you purchase your new home you use a special lender that will finance your purchase as if you sold.
The lender will approve you based on your equity in your new home, and use an estimated appraised value of your existing home. This is the price that you are guaranteed to receive for your home. You will still need to pay agent commissions and closing costs.
This option will allow you to make an offer on the new home without any contingencies and can close as early as 8 days (expedited closes faster than 21 days have a 1.5% fee).
Once you have closed on your new home you will need to have your existing home listed on the market within 10 days. The benefit of this program is that you receive the entire proceeds based on what your home sells for.
This program stipulates that you must sell within 90 days. If you do not sell within 90 days, you will receive the guaranteed price minus any costs (fees, closing costs, home prep fees, inspections, and realtor commissions, etc.).
Pros: Again you will be able to make a non-contingent offer on your new home and remain in your existing home, so you would only need to move once. You will have a guaranteed price for your home, and an opportunity to sell your home at market value.
Cons: In order to take advantage of this program you are required to use the program’s lenders. Your loan qualification will be based on the guaranteed offer price and may limit your purchasing power toward your new home. You will be paying two mortgages while you continue to own your original home. The fee to use this program is 1.2% of your home’s value.
The process of moving to a new home and selling your existing home has never been easy.
The traditional ways of buying and selling a home burden the homeowner with varying degrees of risk and inconvenience.
These new solutions attempt to solve these inherent issues and make it easier for the homeowner to move.
The key to any homeowner faced with this challenge of moving and selling a home is to talk to a professional realtor in their local market. An agent who has an in-depth knowledge of your market, and the experience and knowledge of the different options and programs available will be able to help you explore the solution that would best suit your needs.
If you are considering moving, and are faced with this challenge, please contact me to set up a free consultation to discuss your situation and what options are available to you.
Contact Me Today
Have a question? Interested in setting an appointment to talk about your real estate plans? Contact me today.