With most tasks in life, experience makes things easier. That’s not always the case with home buying, especially if you’re both buying and selling at the same time. The stress of being a buyer and seller doesn’t just accumulate in this scenario, it grows exponentially. But with research and careful planning, it can be done. Really. People with less real estate acumen than you do it every day. You got this.
The holy grail of simultaneous sale and purchase is a same-day closing: You close the deal on the sale of your current home on the same day you close the deal on your new purchase. It can happen – and you can also win the lottery, but chances are slim. By far the simplest method is to sell your current home and not shop for a new home until after that transaction closes. The upside is you can handle each transaction on its own. The downsides are finding temporary housing and moving twice. And if you’re in a seller’s market you end up sitting on the sidelines until your current home closes.
It helps to acknowledge that you’ll be faced with lots of decisions that affect each other, which can be scary. But nothing is scarier than the unknown. Research, plan and then research some more. Go through your home with your agent to identify repairs or cosmetic fixes you should tackle to make you home sell faster. Start packing up your things to reduce clutter and get a head start on your move. Some of this physical work can help give your brain a break from the mental calisthenics involved in buying and selling simultaneously. Meanwhile, here are some strategies to survive the next couple months:
Assess your finances
Take a hard look at your financial options. Do you have money for a down payment without selling your current home first? Can you swing two mortgage payments for a few months? And ask yourself how comfortable you are with stretching yourself financially. Remember that you’re dealing with another seller and buyer, so even if you have everything lined up, things can go wrong. It’s best to be prepared for some unexpected delays, which might have a financial impact.
Get expert help
Local real estate agents will help you research the real estate markets where you are buying and selling. Are you selling in a seller’s market and buying in a buyer’s market? That’s the best-case scenario and, like most best-case scenarios, all too rare. Chances are you’ll be on the wrong side of the equation on at least one of the two transactions and that will inform everything else, including whether you buy first or sell first. If you aren’t planning on moving far, using the same agent help you sell your current home and buy your new one helps consolidate your communication.
Make a contingency contract
Essentially this means when making an offer on a home, you agree to buy it with the understanding that everything stays on hold until your current home sells. This sounds perfect, right? If you’re buying in a buyer’s market, it will probably work. Your seller will just be happy to have a potential buyer on the line. But if the market is hot, sellers don’t want to tie up their home waiting for you to sell yours. They’ll happily wait a few days for an offer with no contingencies. Likewise, if they’ve got a contingent offer on their new home, it’s unlikely they’ll want to start a daisy chain of contingencies.
Extend closing on purchase
This is similar to a contingent offer but without the contingency. If you’ve found a new home you want and your agent is confident you will be able to sell your current home in a short time period, you can ask for the closing of your new home to be flexible up to a few weeks later than the standard 30-45 days. The seller may want more earnest money, understanding that if you don’t meet that new deadline you’ll forfeit the money. This will help assure the seller that you are serious. You can also use this extra time to get financing nailed down in case you don’t sell in time. In a competitive seller’s market, know that this type of bid isn’t very attractive. You might need to boost your offer price a bit to make up for the delay.
Do a rent-back
If you are selling in a seller’s market where good homes in your price range are tough to come by, you can ask for a “rent-back” provision. Usually 60-90 days maximum, a rent-back means you get to stay in your home after it sells. Of course, there’s a cost, either in reduced sales price or daily rental to the new owners. And if they have their choice of homes to buy, they probably won’t be eager to take you on as temporary tenants.
Borrow what you need
Even if you can swing the double mortgage payments for a while, chances are you need the proceeds from your home sale for a down payment on your next home. If that’s the case, you may want to borrow the down payment from family, your retirement fund or possibly a bank in the form of a home equity loan on your current home. If you do take out a loan with your current home as collateral, you have to do that before putting it on the market. All of this makes the loan process for your new home just a little trickier so you want to make sure your credit is good. You may also qualify for a bridge loan, designed specifically to bridge the gap between the purchase and sale of two homes. Make sure to talk with a lender before counting on this option.
Take a breath
If you’ve found your dream home, you may feel so pressured to sell your current home that you underprice it or accept an offer that would otherwise make you uncomfortable. Likewise, once your home is sold you may feel panicked to find a new one and make an offer on a home you might not love six months from now. Take a breath. Talk to your real estate agent. Yes, timing is important and you can’t ponder things for weeks. But don’t let yourself be rushed into decisions you don’t feel good about. Have contingency plans in place in case either transaction, your sale or purchase, is delayed.