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When you can’t afford to buy a new home without selling your current one, you find yourself in a predicament that can be quite tricky. Selling and buying a home at the same time is a daunting task because the last thing you want is to be stuck with two mortgages. The question is, how do you pull it off?
The truth is, it is almost impossible to close both deals on the same day, which would be the ideal situation, right? However, there are certain strategies you can implement to make the transition easier.
In this post, we’ll guide you through this process and give you 7 tips on selling and buying a home simultaneously.
1. Don’t Buy Before You Sell
Buying before selling a home seems like the most viable option when selling and buying a home at the same time because it makes moving easier. However, as ideal as it seems, it’s not the best option for several reasons. You see, when you purchase a second home first, you’ll be piling a second mortgage on yourself, which will make things harder.
Dual mortgages come with potential risks. For starters, you may not qualify for the second mortgage, especially if you’re relying on the sale of the house to make the down payment. Beyond that, it may seem like you can handle paying two mortgages for several months, but you have no guarantee of how long your home will stay in the buyer’s market.
You’ll risk draining your savings, trying to cover all expenses. Still, if you find a home that you absolutely love, selling and buying a home at the same time may be possible with a contingency contract. You can also consider a bridge loan but you need to weigh all options to avoid adding more risk.
2. Plan Your Selling and Buying Schedule
Selling and buying a home at the same time is no easy task, but you don’t have to do it on your own. One of the most significant steps you can take is hiring a professional real estate agent. They will help you understand all the challenges, strategies, and risks associated with both the sale and purchase of your home.
You’ll discuss the current buyer’s and seller’s market and gauge how much you should sell your home for, and how much you should expect to pay for your new home. It may be possible to close the deal at once and transition smoothly, but you’ll need a top-notch agent coordinating the process.
This does not necessarily mean that you can’t sell the house on your own. A lot of homeowners choose the FSBO way, which means for-sale-by-owner, and it still works. However, you need to do thorough research and be careful about the deals you make.
The thing is, the timeline features three parties, which is you, the buyer, and the seller. All of you have to be on the same page and close on the same day, which makes it unrealistic. Even if you make this the initial plan, make sure you have a backup plan because closings are always delayed by unforeseen circumstances.
3. Consider Your Financial Position
Ideally, selling and buying a home at the same time or within a few days would be great. However, things don’t always go according to plan, so what happens when they don’t? You need to consider all factors involved.
For instance, if you run out of funds and don’t have the required down payment for your next home, things will get complicated because you may not get approval for the mortgage.
In this case, you may lose the chance to purchase your potential new home, which will put you in a position of searching for another house. If you can’t afford two mortgages simultaneously, you need to have contingency plans in place if the sale doesn’t push through. You may need a financial contingency as well if your loan approval highly relies on selling the current home.
4. Analyze the Markets
Analyzing the real estate markets is extremely important when selling and buying a home at the same time. You see, you’re considering both the seller’s and buyer’s market. If you’re currently in the buyer’s market, it may take longer to sell your home.
You may have to wait for a solid buyer before you can make a purchase offer for your new home. If you’re in the seller’s market, you have to ensure that you stage your home in preparation for many potential buyers. The seller’s market gives you more flexibility because you can sell your house fast and purchase your new home without giving much thought to contingency plans.
5. Ask for Rent Back Agreement
A rent-back agreement will give you some wiggle room after you sell your current home. You see, with this agreement, the buyer will agree to rent the house to you, so you’ll continue staying there for a given period.
If the buyer agrees, it’s a cost-effective option because you won’t have to rent a different place while waiting to close the deal on your new home. You also won’t have to pack and move in a hurry, and it’ll make transitioning easier for you.
6. Rent Out Your Current Home
If you decide to purchase a new home before selling your current home, you can rent it out to cover one mortgage. The property will still be on sale, but regardless of how long it takes to sell, you’ll have money to help with all the expenses.
7. Have a Backup Plan
No matter how well things seem to be going and how carefully you and your agent have planned, having a backup plan is a smart move. When selling and buying a house at the same time, you need to understand that plans may fail to go according to plan, and others may fall through completely.
For instance, finding a short-term rental place in case you sell your home before buying another means you’ll have a place to live in the meantime. Not all buyers will agree to give you the rent-back agreement, so you must be ready.
Selling and Buying a Home at the Same Time
Selling and buying a home at the same time won’t be easy. It’s vital that you understand what to expect so you can make plans and prepare yourself accordingly. However, when both deals go according to plan, transitioning can be seamless.
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