Selling your current home and buying a new home at the same time requires a strategy and skill.
Evaluate the local housing market:
The state of the real estate market in your area is the biggest factor in timing your home purchase and sale correctly. Knowing what kind of market you are in is important whether you are just moving locally, or if you're moving to another town.
Understanding the market you are interested in will help ensure you don't miss out on a home you want because you waited too long to put in an offer in a seller's market.
If you are thinking of selling your home first, you should know how much homes in your neighborhood are selling for. When it comes to knowing your market, your most valuable resource will be your real estate agent. Your agent will be your trusted adviser to help you determine the market value of your home, but also they will be able to talk you through timing, strategy, and negotiation.
What is a buyers market?
In a buyers market, there are more homes available than people looking to buy. In a buyers market, you will likely have an easier time finding your new home than you will selling your current home. Sellers may be willing to accept a contingent offer, which means you agree to purchase their home contingent on selling your home first.
What is a sellers market?
In a sellers market, there are more buyers in the marketplace than there are homes available. In a sellers market, your current home will likely sell more quickly than you will be able to find a new home.
Understand your finances:
Once you understand the condition of your market, you should consult with your mortgage banker about your finances. Determining how much you can afford will allow you to set realistic expectations on pricing your home and making an offer.
- Can you afford a down payment on a new home and carry two mortgages?
- Is a bridge loan a viable option (higher interest rate and you need equity in current home).
If you sell before you buy:
Selling your current home before you buy a new one is a more financially secure option, as you will know exactly how much money you have to spend on a new home. This can also be inconvenient as you will have to find a rental or move in with relatives and move twice. Finding a short term rental can be a bigger problem.
Pros of selling before buying:
- You will know exactly how much equity you will have available to put toward your new home.
- You can easily roll your existing equity into the new purchase.
- It can be less stressful to close the deal on the current home before moving on the replacement home purchase.
If you list your current home for sale you can make it contingent upon finding a replacement home. This works best in a seller's market. In this case, you will list your house first, then once you have an offer start looking for the replacement home. When writing the offer on the new home be sure to make it contingent upon the sale of your current home. You can coordinate closing dates on the current and new home and if necessary, close on the current home and rent back from the buyer for a few days or weeks. This will insure your current home is sold and closed and remove the sale contingency from the contract.
If you buy before you sell:
Buying a new home before you sell your current home is the riskiest route. You are asking the seller to wait until you find a buyer for your home. If you don't find a buyer in the contract time frame, you will likely loose the home your were wanting to buy. Sellers don't like this contingency because they offer little to no assurance that you will actually be able to purchase their home. In a seller's market this is almost impossible to do.
Pros of buying before selling:
- You have somewhere to move right away.
- You only have to move once, which allows you to save money on storage units or temporary housing costs.
- You are less pressured to make quick buying decisions, as you can always stay in your current home a little longer if you don't find a replacement home.
Cons of buying before selling:
- You may feel rushed to sell, which may lead you to a take lower offer than you would like.
- Contingent offers are less competitive, especially in a very active, hot market.
- You may not have enough cash to make a competitive offer if your money is tied up in your current home.
- If you decide to rent out your current home, it requires being a landlord and can be difficult to sell while tenants are living in the home.
All of these options do not take into consideration that you could get lucky! You could find a seller who is willing to take a contingent offer because he also needs extra time to find a home or has some other circumstances.
Don't be discouraged, it can be done very successfully. I recently helped Amanda and her family sell a home and buy a new one, here is what she had to say.
"Sandra is a very knowledgeable and experienced Realtor. She helped us sell our house and buy a new one all at the same time and every thing went so smooth. She gave us good advice when we needed it and she listened to our wants and needs."