Planning to move? Should you find a home first? List your home first? Here are some tips for selling your home while buying aa new one.
The stress of buying a new home at the same time that you’re selling your previous one is enough to make anyone second guess the entire buying and selling process in the first place. If you sell your home first, you could end up with no place to live until you close on your ideal house and if you purchase a house first, you could end up paying for two homes until your first home sells. While this may seem like a game of luck and chance, there are a few things you can do to make sure you are setting yourself up for success, ensuring that both processes go as smoothly as possible.
Know the Real Estate Market
As with any big decision, you want to know the playing field first. Before you put your home on the market and start narrowing down the search for a new house, make sure you have a firm grip on the housing market in your area and in the area that you’re planning to buy in. Your plan of action is greatly affected by which side the market is in favor of, so this should be your first course of action.
If You’re In a Buyer’s Market…
If you’re in a buyer’s market, this means that there are more homes available than willing buyers. In this case, you’ll have an easier time finding a new home than selling your old one. If this is your situation and you find your dream home, see if you can make an offer with a “sale and settlement contingency.” This means that your offer is continent on your current home selling. In this case, the sellers of the home you’re purchasing are still allowed to seek other offers, but you’ll get the first right of refusal if you’re unable to remove the contingency when a second offer comes in. Contingencies characteristically work best in buyers markets, when the seller is less likely to get another offer.
If You’re In a Seller’s Market…
On the other hand, in a seller’s market, there are more buyers than there are homes available. This means that your current home is more likely to sell quicker than you might be able to find a new home. There are two options you might want to consider in this scenario. The first is to make an offer with settlement contingency. When you have an offer on your current house and find a new home, you can submit an offer with a settlement contingency, which means you’ll buy the home contingent on the sale of your existing home closing. The second option is to ask for a rent-back agreement. A rent-back provision is when you go through with the sale of the home, with the agreement that you can rent the home back from the new owners (and keep living in your home) for 60-90 days. This option can give you more time to shop for your new home, while still giving you right to use to the money from your sale.
Use Personal Savings, a HELOC or Bridge Loan
If the above options don’t work for you, you can also consider using a personal savings, a HELOC or a Bridge loan. It’s difficult for most people to afford to pay for two mortgages at the same time or to buy a home with cash if you don’t have a hefty savings account. If this is the case, you may want to consider using a HELOC or Bridge loan to cover the cost of buying your new home while you’re still paying your old mortgage. Consult with your bank or real estate agent to see if this option may work for you.
Rent Out Your Home
In a lot of cases, you can actually find renters that are willing to pay more than what your monthly mortgage cost is. If you end up finding your dream home before selling your old one, this is a great way to negate some of the cost of the mortgage.
Find a Temporary Home
In some cases, renting a home for a short period of time is the best option for those who end up selling their home rather quickly, yet haven’t found the right home to move in to. This is also a great option if you’re not able to get a HELOC or Bridge loan and need the money from the sale of your home to buy a new one. Moving twice may be a hassle, but it can be worth it in the end if you end up finding a great home.