Do you have your eyes on a home that has recently come on the market? Perhaps you have also found a property you’d like to buy before your first home sells.
What do you do in this situation? Nearly 70% of repeat buyers owned their previous properties, meaning they are likelier to do double-duty as both buyer and seller.
In a seller’s market, selling your current home fast isn’t often a problem. You may think that selling first is the best option. But depending on the situation, selling and buying a home at the same time can prove to be tricky.
Considering how much time and money you’d have to invest in both processes, selling your current home before buying a new one might be the way to go. Here’s how you can have the most efficient home-selling and buying processes.
Selling and Buying a Home at the Same Time
When you are looking at trying to sell and buy a home at the same time, there are a few challenges you need to tackle to handle both transactions.
For instance, the first step is to think about how to fund your new home. Unless you have a ton of money stashed away to help you splurge, you may struggle to come up with the down payment.
This becomes more difficult since your current house will tie up your equity. However, having a lot of equity in your home does not mean you have immediate access right away.
You will have to first sell your home and close on the deal. Then you can use that money as a down payment to purchase your new property.
Next, you need to consider whether you want to buy or sell a property first. Even though your goal is a simultaneous settlement, you will learn that one will usually be done before the other.
Looking at the market is the best way to indicate which one to do first. If it is a rising market, you will notice that house prices will be increased. This means it makes more sense to buy the new property when your prices are low.
Then you can sell later when the prices are higher to make a profit. This will also help you save on your purchase to earn more from the sale. However, many people do not want to buy a house first before selling their old one.
Even though you can have more time to choose the right home at the right price without any pressure from selling your previous home, money can be a factor why you would rather sell first and buy later.
Otherwise, you may have to pay two mortgages if you settle a new sale before selling your old house. You may also not be approved for your new loan because the debt-to-income ratio will be higher since you have an existing mortgage.
Then you may feel pressured to sell for less to settle the deal quickly to help get rid of the second mortgage. It is important to know that most homeowners with a mortgage will sell first to avoid tackling the risk of a double mortgage.
The good news is that you have some options to help if you want to buy first. You can always get a bridging loan to cover the expenses until you finalize the sale of your property.
Selling Before Buying
If you have a falling market, it will indicate that the house prices are on their way down. This means it is better to sell first when the prices are high. Then you can buy a property later when the prices are low.
This way, you maximize your profit on the sale and pay less for the new home. Selling helps ensure that you only need to pay one mortgage. There is also no pressure to sell since you have not bought anything yet.
Then you can easily wait for the right price instead of caving to pressure. If you know how much your home will sell for, you can also find out the budget for your new home.
Then the loan approval becomes easier as well since you do not have a second mortgage hanging over your head.
However, it is important to note that you can be out of pocket during this process because you will need funds to rent a place while you look for your new property if you sell the current one quickly.
You will need to pack up all your belongings with loved ones to move to a rental since your buyer will want the keys to your old home.
While paying rent on someone else’s property while you look for a new home, you may feel pressured to buy quickly and get a worse deal. This is because you may find renting annoying and cannot wait to get your own house again.
For instance, you may not find a rental in the new area you want to live in and might buy a house fast to move instead of waiting for the right price. Moving houses twice can also be annoying and expensive.
Therefore, you should carefully time the selling and buying process to ensure you do not lose a lot of time and money.
How to Sell Your Home and Buy a New One?
To ensure you do not lose too much money and time, you should consider working with an iBuyer. Although you can use a real estate agent to help with your venture, remember that they often charge exorbitant fees.
They may also have too many clients. Then it will be difficult for them to dedicate all their time to help you juggle decisions to close and settle on both houses simultaneously.
Instant buyers or iBuyers use online home value assessment tools to estimate your property’s value. Then they act as real estate buyers to give you the best offer.
This helps cut down a lot of costs, and you can get an offer quickly to avoid moving delays. Then you can get your property ready for sale at the right time while negotiating special conditions that can close the best deals on both ends.
Another thing to do if you are selling a home while buying a new one is to extend your settlement period for a little longer. However, this can only work if the other party has no problem waiting.
If you decide to sell first, your sale contract should include an extended settlement as a condition of the sale. If your buyer is willing to wait, you can have more time to locate and buy the new home you want to move to before settling the sale of your current property.
This way, you can increase your chances of moving from your current house to the new one. If you are wondering where to live between selling and buying, your options are a short-term rental or a hotel.
These will be expenses, and you can also lose potential buyers who do not want to wait long to settle.
On the other hand, if you decide to buy first, you need to ask the seller to include an extended settlement as a sale condition in your contract. This will work if the seller is not in a hurry to sell.
Then you can have some extra time to find a buyer for your property. This way, you can increase your chances of selling the property before settling on a new one to avoid two mortgages.
However, a seller can reject your offer if they get funds from another buyer much sooner with a normal settlement period. Your agent should help you negotiate an extended settlement to ensure you get enough time to prepare for the move.
Move Houses Once
Buying a property without taking on the risk of two mortgages is also possible. This can be done by adding the sale of your current house as a condition in your purchasing contract.
This way, you can be allowed to sell your current property before settling on the new one. Then you can move houses once directly into your new home instead of renting or staying in a hotel in between.
Although this sounds great, you will need to spend a lot of money hiring a top realtor to help you negotiate such a deal, especially since you will face a lot of competition from other buyers for your new home.
The other buyers may not add conditions to their offers, so a seller will be more inclined to sell to someone else who can pay them and close the deal faster than you.
To tackle this competition, you may need to offer more money to make your offer stand out. This can be done by including unconditional and settlement deadlines in your contract.
Then both parties can end the contract if the deadlines are not met. Alternatively, you can work with an iBuyer to save yourself from all this hassle to get everything settled much sooner.
Loans and Agreements
You will need a lot of equity in your current property before a bank can consider offering you a loan to help make the transition of moving a lot smoother.
This would be known as a bridging loan to help you afford the rental property before moving into your new home.
If a bridging loan does not work for you and the buyer is not flexible on your settlement date, you will need to enter into a rent-back agreement with your lender and buyer.
This will give you time to find a new home while staying as a tenant in your current house after the settlement. A rent-back agreement will let you stay in the property after a new buyer becomes the owner.
Then they will require you to pay rent until you move out. This will be treated as a regular rental property, so you may need to pay a deposit with advance rent that can be negotiable. You will also need a formal lease.
To avoid delays between selling and buying a house at the same time, you need to always have a plan B. This should involve an emergency fund account to cover a short-term rental or a hotel unless you apply for a bridging loan.
Then you will also need somewhere to store your belongings until you can move everything into the new house. To save money, you can stay with family and friends if they are okay with letting you crash for a while.
Remember that your buyer may also be selling a home while buying a new one. They may also have agents to settle all of their properties. Therefore, it is always best to have everything done on your side to prevent delays.
You should also not assume that you will qualify for a larger home loan. Then it becomes worthwhile getting a pre-approval. Or else you can find yourself scrambling to find a property in your price range after selling, which can take weeks or months.
Since selling and buying a home is complex, it is best not to work with too many agents. You should always keep it simple by choosing an instant buyer to handle both property settlements.
Most sellers prefer to finalize the sale of their property and get funds transferred into their accounts before settling on a new property. Therefore, choosing a weekday morning gives you the best chance of getting that money into your account sooner.
Now that you know the ins and outs of selling and buying a home at the same time, it is worth finding the best instant buyer to work with. They can help navigate the entire process.
The best thing to do is to consider a cash option for your home to make things smoother.
Cash Offers on your home? You’re in the right place!
This way, you can sell your home and get the money before settling on a new property to ensure you have enough funds. Submit your home address to get a cash offer to help pay for your new home.