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As of June 25, 2018, we’ve made some changes to the way our mortgage approvals work. You can read more about our Power Buyer ProcessTM.

It’s a seller’s market out there right now. Tight inventory has led to an environment of rising home values. Homes are coming off the market almost as soon as they can be put on.

If you’re trying to buy a new home while selling your old one, these market conditions lead to a bit of a double-edge sword. If you follow some basic advice that we’ll get into below, you stand a good chance of selling the property that’s in good condition relatively quickly. On the other hand, it may be difficult to find the home that you’re really looking for given the lack of options on the market.

With that in mind, you may be tempted to find your new home before selling your old one. There are different ways to do this. After we touch on these, we’ll move to our best tips for juggling buying and selling at the same time.

Freeing up Temporary Cash

If you’re looking to buy your new home before you close on the sale of your old one, there are couple of ways to free up some of the short-term cash that may be necessary. We’ll go over the pros and cons of a couple of loan options that exist to help with this transition.

Bridge Loans

One option you have to free up cash either for a down payment or to make sure you can afford two mortgage payments for a short period of time is to take out a bridge loan. Lenders that offer bridge loans provide short-term loans based on the home equity in your current property. The idea is to pay off the loan when the home is sold.

The benefit of these loans is that they offer a certain amount of financial flexibility. You can put an offer in on a home without having to worry about making a contingent on the sale of your property. The payoff time for these loans is usually around six months, but may be longer.

On the downside, you have to make sure that the sale is worth enough to cover the remaining principal and interest on both the existing mortgage and the bridge loan. The interest rates on this type of loan may also be relatively high.

Quicken Loans doesn’t offer bridge loans at this time.

Home Equity Loan

Another option is to take out a home equity loan to cover the down payment while you wait for your house to sell. You take advantage of your existing equity to help you move up into a new house without having to wait for your old one to come off the market.

However, home equity loans or lines of credit are considered second mortgages. This leads directly to the primary disadvantage of this option.

Rates are higher on second mortgages than they would be on your primary mortgage because the lender and potential outside investors are taking on additional risk. This risk is that you’re going to make your payment on your primary mortgage first if you get into any financial difficulty. When you go to pay back the loan, you’ll be paying more in interest due to the higher rate.

Quicken Loans doesn’t offer second mortgages, such as home equity loans or lines of credit, at this time.

Selling Your Home

When you’re looking to sell your home, there are some basic tips you can use to get the most out of your current house and, given current market conditions, get your money pretty quickly. These next few tips will hopefully have interested buyers throwing their best offers at you.

Price Just Right

The old conventional wisdom was to price high and come down in order to give yourself the most room to negotiate. We’ve entered an era where buyers have access to more information than they’ve had at any time in the past. With many websites offering your potential buyers the chance to check out values for similar homes in the area in a matter of clicks, starting high could actually turn off motivated buyers.

At the same time, you don’t want to shortchange yourself by pricing your home too low. So what’s the key?

You want to be in the Goldilocks zone with your listing price, having it be as close to just right as possible. An experienced real estate agent who knows the area and what comparable homes are going for can help you. There are really two major benefits to this approach.

First, once you agree to an offer, homes that are priced right to begin with are less likely to have deals fall through due to a low appraisal. This can make the entire transaction go smoother. You also likely won’t have to come down in price at the last second to sell the home.

The other major advantage is that if motivated buyers see that your home is priced correctly and they see real value, you may be able to set up a bidding war between interested buyers. You may end up with someone who’s willing to waive the appraisal contingency and bring extra cash to the closing table because they really want your home. You could actually make more money by not pricing your home too high.

Hit the Whole Market

Some real estate agents may make you an offer that sounds fairly enticing at first. When you want to list your home, they’ll tell you they can do something called “coming soon” showings. They’ll do a series of preview showings before your house officially hits the multilisting service (MLS) in order to gauge interest and potentially find a buyer. They may also tell you you’ll save on the commission.

Here’s the real deal – agents routinely split the commission between themselves as it is, so you’re not really saving there. The agent usually just wants the commission for themselves.

It’s true that you may not care who gets the commission, but by not listing on the public MLS, you’re limiting your number of potential suitors. By not putting your house on the public market, you could be leaving dollars on the table. You never know when a bidder might see your house and pay several thousand dollars above listing price to get their dream home.

How Photogenic Is Your House?

Don’t underestimate the power of good listing photos. With the emergence of online listings that offer tons of pictures and even the occasional virtual tour, first impressions now mean more than ever.

Ask your listing agent if they work with professional photographers and how they plan to show off your home online. I know it can be tempting to take out your smartphone and just snap a few pictures of different areas around your home. However, professional photos from someone with the right equipment and the knowledge to use it could be the factor that makes your home pop off the page among dozens of others. A couple hundred bucks may end up being worth thousands.

Tips for Your Offer

When it comes to the buying process, you should know that low levels of home inventory have made the real estate market as competitive as ever at the moment. This makes finding a home slightly more difficult, but it’s by no means impossible out there right now.

When you find the right house, here are some tips on how to make your offer stand out among the crowd.

Avoid or Minimize Messy Provisions

Buyers in more forgiving markets might include an appraisal contingency that says they won’t pay any more than the actual appraised value of the home. Although this can provide a nice safety net, in an ultra-competitive market, you may not have this luxury.

As a middle ground, you could include the appraisal contingency along with a clause that also allows you the opportunity to waive it if another person gets involved in the bidding for the house.

Consider also how you’re going about the home inspection process. Although you probably shouldn’t waive the right to have an inspection done unless you’re an experienced home buyer or have a construction background and know what to look for, you could consider shortening your window to have the inspection done. As long as you have everything lined up, this will speed up the process and be more enticing to the seller while still allowing you the peace of mind that comes with an inspection by a professional.

Include a Clause to Bid Up

One of the most obvious things you can do to make your offer stick in the mind of a seller is to have the most gold in the pot at the end of the rainbow. That said, you don’t want to be bidding against yourself.

There’s a way around this. When you submit your initial offer, you can include a clause that says you’re willing to go a certain amount over and above bids up to a final offer. For example, you might put an initial offer of $150,000 on the table with the provision that you go $1,000 higher than any future offer up to $160,000. You may end up paying a little more for the house then you initially planned on, but if the house is right, you may think it’s worth it.

Can You Afford Two Mortgages?

With supply being as tight as it is, you may want to find your new home before putting your old one up for sale. It’s common to have a provision in a purchase agreement that says your offer is contingent on the sale of your previous home. However, as we’ve stated above, sellers can be really picky right now. Given that their motivation is to sell their home as soon as possible in many cases, it may not be wise to include such a provision in your purchase agreement.

With that in mind, one way you might get around this is to see if you can qualify with more than one mortgage payment, carrying them both until you can sell. This won’t work for everyone, but it’s something to consider. The good news is if you followed the sales tips above and the house is in good shape, you should start getting offers rolling in fairly quickly when your current house hits the market.

Are you getting ready to buy a new home? We’re here to help! You can get a preapproval online through Rocket Mortgage® by Quicken Loans®. If you’d rather get started over the phone, one of our Home Loan Experts would be happy to take your call at (800) 785-4788. If you have any questions for us, feel free to leave them in the comments section below.

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This Post Has 2 Comments

  1. We are looking to possibly buy a new home. The new home we are looking at is 11 years older than what we are living in now. We haven’t started listing or anything yet, but wanted to see if it was even possible to get out a loan for this new mortgage if our current home is for sale. We would more than likely make at least 20,000 on the sale of our home for down payment on the new home which is currently listed at 269,000. Now we would want to offer lower and see if the seller would accept. We currently have our mortgage through Quicken Loans. Let me know, Please and Thank You!

    1. Hi Andrew:

      It’s very common to want to do this. It can be done. The only thing you need to be aware of is if you buy the new home before the sale of your prior home has closed, you’ll have to decide whether you can qualify with two mortgage payments. If for some reason you can’t, you can make your offer on the home you’re looking at contingent on the sale of your current home, but some sellers who might be motivated to get out of their home quickly may see this as a negative, so it’s something you have to really consider.

      You can edit your approval letter to include any amount up to your approval amount, so the seller doesn’t have to know how much you’re approved for. All they know is you’re good for the amount you’re offering.

      If you would like to go over your options, you can get started online with Rocket Mortgage by Quicken Loans. You can also go through this with one of our Home Loan Experts to go over your scenario specifically. We can be reached at (888) 980-6716. Have a great day!

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