Buying a new home while you’re trying to sell your current home feels an awful lot like juggling too many things at once. Either one of these goals on its own is already a lot of work. When done together, buying and selling a home can seem impossible.
In addition to struggling with the commitment of both buying and selling, there are also financial complications. For example, you might need to pay two mortgage payments if you find a new home before you sell your current one. It’s not like you can live in two places at once, so here’s how to sell your home while buying another.
Decide to Buy or Sell First
No matter how perfectly you time it, you likely will need to make a decision to either buy a new home or sell your current home first. There are pros and cons of both options, so you’ll have to decide what sounds like the best fit for your financial situation.
If you choose to buy first, you’ll feel comfortable knowing you have a definite place to live. This leaves you more time to find a new home that’s right for you without having to rush because your home sold too quickly. However, you also might feel rushed to sell your home, and this might lead to a less competitive offer on your new home.
On the other hand, selling first means you have more cash to buy a new home. Of course, you also might need to find somewhere to stay while you search for your new place. Ultimately, you’ll need to decide which option makes the most sense for you. When in doubt, talk to your real estate agent about the best option in your market.
Buying Your New Home First
If you choose to buy your new home before you sell your current home, you’ll approach things a little bit differently. Because you might end up needing to pay two mortgages at once, this route comes with more financial responsibility. Of course, the ability to take your time often makes it worth it for many people. Take these steps for a smooth transition:
- Consider Contingency – You might want to make your offer with a “sale and settlement contingency” which means your offer will only go through if your current home sells. This might not be possible depending on your real estate market so talk to your agent first.
- Bridge Loans – Becuase you’ll need to pay two mortgages, look towards your personal savings or bridge loans to make this financially possible. Another option is a HELOC, or a home equity line of credit offered by your mortgage lender for these types of situations.
- Rent Your Home – Finally, having renters in your old home can help cover the costs of the mortgage while you sell. You’ll also need to be ready for the responsibility that comes with being a landlord.
Selling Your Current Home First
Selling your home first means less financial stress since you can put the money from your first home sale towards your new one. It’s important to realize you might be left without a place to stay in the meantime if you aren’t careful. Follow these steps below:
- Consider Contingency – Once again, you can use what’s called “settlement contingency” which means you can offer your home up until a certain date on which you’ll no longer be locked into your deal as a seller. If you’re in a competitive market, this might not make your home very enticing to potential buyers.
- Rent Back Your Home – The new owners might be willing to enter a rent-back agreement meaning you’ll stay in the home for an agreed-upon time frame while you find your new home. In this situation, you’ll be renting the home from the new buyer.
- Temporary Housing – Finally, if all else fails, consider finding temporary housing to live in while you wait to find a new home. Then, you can use the money from your home sale to continue searching for a new home.
Talk to your real estate agent about the best plan for buying and selling in your market. There is no one-size-fits-all, but as long as you know what to expect, you can make the right choice for your situation. Your dream home is closer than you think!