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Your Guide To Selling And Buying A House At The Same Time

10-Minute Read
Published on July 13, 2022
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Buying a home is stressful. So is selling one. Doing both at the same time? That can be maddening, no matter how many times you’ve bought or sold a home in the past.

There’s a big challenge with buying and selling a home at the same time. Because most people can’t afford two monthly mortgage payments, homeowners typically must sell their current home before they can finalize the purchase of a new one.

That puts these homeowners at a disadvantage, especially in a hot real estate market, because most sellers don’t want to wait for their buyer’s home to sell before they close the sale of their home. Instead, they’ll wait for an offer from a buyer already approved for mortgage financing who can move in immediately.

If you can’t sell your current home before the closing date of your new home purchase, you can end up paying two mortgages. If you don’t want or can’t afford to make two mortgage payments a month, you might have to sell your home first, store your belongings and rent while you search for your next home. The same might be your only option if you are relying on the proceeds from your home sale to cover the closing costs of a down payment on your new home.

Fortunately, there are steps you can take to erase at least some of the stress of selling and buying a home at the same time. It’s all about having a game plan.

How To Buy A House While Selling Your Own

Just because buying and selling at once can be difficult, doesn’t mean it’s impossible. Here are some steps to take to boost your odds of success:

Research Your Current Market

Work with your real estate agent to learn as much as you can about the market where you are selling your home, paying close attention to the sales prices nearby properties fetch. This will help you determine your own home's listing price.

It's important to research the average number of days it takes for homes in your neighborhood to sell. Your real estate agent will also help you with a marketing plan for your home and will make suggestions on how to stage your home so that it looks enticing to buyers.

Learn About Prospective Markets

Next, do the same kind of research on the neighborhood in which you want to buy a home. Again, research how much homes there tend to sell for and how long it takes, on average, for homes to sell. This will help you determine if homes here are within your budget and how quickly you'll need to sell your property before you close on the mortgage financing you need to buy your next residence.

Review Your Finances

Studying your finances is a key step in buying and selling at the same time. Do you already have enough cash saved for a down payment on a new house? Do you have enough in savings to cover the closing costs on your next home purchase?

If so, you might be able to buy a new house before you close the sale on your current one. If not, or if you can't handle two mortgage payments in the same month, you might need to sell your house and close that sale before you buy your new home.

Consult A Trusted Local Real Estate Agent Or REALTOR®

Working with a local real estate agent can remove much of the stress when you are trying to buy and sell a home. An experienced real estate agent can help prepare your current home for sale and find potential buyers for it while also showing you new homes in your desired location. Real estate agents can also help you find temporary housing between your moves, if needed.

If you’re buying and selling a home, working with a local real estate professional will boost the odds that your current home sells as quickly as possible.

Consider All Available Financing Options

If you’re like most buyers, you’ll need a mortgage to finance the purchase of your new home, even if you sell your current residence before buying your new property. The challenge with buying and selling at the same time? You might not be able to afford mortgage payments on two homes at once, something that could happen if you find and buy your new dream home before you sell your current residence.

If you can’t sell your current home before buying a new one, you might not have the funds necessary to cover your closing costs and down payment for that new residence, either.

Fortunately, there are options you can turn to for financial relief when you’re buying and selling at the same time.

  • Bridge loans: Some homeowners take out a bridge loan to help keep them financially afloat until their current house is sold. This is a short-term loan that, as its name suggests, is designed to bridge the gap between buying your new home and selling your current one. This loan provides money that you can use to fund the down payment on your new home and the closing costs that come with buying if you don’t have the proceeds from a home sale on which to rely. You usually aren’t required to make payments on this type of loan immediately. If your timing is right, your payments won’t start until after you sell your current home. You can then use the proceeds from the sale of your current home to pay off your bridge loan.
  • Home equity line of credit: Another option is to apply for a home equity line of credit (HELOC). A HELOC allows you to take out a line of credit to get cash quickly, but it uses the value of your home as collateral for the loan. Then, you can use the HELOC funds as a down payment on the new home and repay it with the proceeds from your home sale.
  • A mortgage with a low down payment: If producing the funds for a big down payment is the challenge, you can always search for a mortgage loan that requires a smaller one. Fortunately, there are several options. If you have a FICO® Score of 580 or higher, you can qualify for an FHA loan that requires a minimum down payment of just 3.5% of your new home’s final purchase price. If you are a veteran, you might qualify for a VA loan that requires no down payment at all. You might even qualify for a conventional mortgage loan that requires down payments as low as 3% of your home’s purchase price.
  • 401(k) loans: You might be able to borrow funds from your 401(k) plan to cover the costs associated with buying a home, including down payments. If your 401(k) plan allows this – and not all do – you won’t face any penalties, but you will have to repay what you borrowed with interest. The big downside is that this money is supposed to be used for your retirement years. By borrowing from it, you are reducing the amount of money you would otherwise have saved for your after-work years. Because of this, borrowing from your 401(k) should be a last resort.

Be Aware Of The Risks Of A Contingent Offer

You might make a contingent offer on a home when you are trying to sell your current residence. Typically, your offer will state that you can’t close on the new home until your current one sells. This type of contingent offer is a tool that buyers use when they want to minimize their financial risk in case they struggle to sell their current home.

With a contingent offer, these buyers don’t have to produce a down payment or closing costs until their current home sells. They also don’t have to worry about making two mortgage payments because they’ve had to buy their new home before their old one sells.

The drawback of making a contingent offer is that the seller can reject it or make a counteroffer that negates the contingency. There’s also the possibility that your contingent offer could get passed over for another offer without one, which is especially common in a seller’s market. In a hot real estate market, homeowners will receive plenty of offers that come with no contingencies. Why would these owners accept a contingent offer that could fall through?

If you’re attempting to buy a new home before your house is sold, it’s vital that you weigh the odds that a contingent offer will succeed. Consult your real estate agent on the best way to go about this process.

Start Shopping For Your New Home

You can shop for your new home while you’re trying to sell your current one. This includes working with a real estate agent who can find homes in your budget in the neighborhoods you’re considering.

Just be aware that you might find a new home before closing the sale of your current one. That could lead to financial stress: Can you take on the costs of buying a new home and potentially making those monthly mortgage payments on two residences at the same time before you sell your current one? You run that risk when buying and selling at the same time.

But if you don’t look for a new home while selling your current residence, you might also miss out on a property that is the perfect fit for you. You’ll need to weigh the pros and cons of buying and selling at the same time to determine the right move for you.

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Have A Backup Plan If Your New Home Purchase Falls Through

Even if you do your best to time your buying and selling processes perfectly, there’s always the chance that the purchase of your new home will fall through or be postponed. If this happens, you might be left without a place to stay for a few weeks or months. While this is annoying, a purchase falling through should be an inconvenience rather than a crisis.

With proper planning, you might already have created a contingency plan for this. If not, you have several options:

  • Short-term lodging and storage: Short-term rental sites such as Airbnb have made the home transition process easier. If your purchase falls through, you might be able to rent an Airbnb or Vrbo in the area that fits your budget. These typically provide discounts for stays of more than 30 days and can help you move into your new neighborhood, even if you can’t move into your new home. You can usually find short-term storage options with major national storage chains, too, so if your things are already boxed up and move-in ready, you can just put them in storage for a few weeks while you work out your housing situation.
  • Purchase a different home: If the purchase fell through completely rather than being postponed, it might be time to restart your purchase process. Your REALTOR® can help expedite your next purchase. Your agent will already know what you’re looking for, your budget and more. This agent will also have a pulse on similar homes in the market and will be able to set you up with showings ASAP.
  • Stay with friends and family: If you’re staying local or moving to an area where you know people, you might be able to crash with friends or family until you purchase a new home. While it can be difficult to share space with other people, this might be the most natural transition to a new neighborhood. This is easier for single people or couples rather than families, but it’s an economical option to help you get settled while relocating.

Keep in mind that losing out on a home purchase might turn out to be the most financially advantageous situation. Instead of being responsible for two mortgages, you might find yourself without any. This will help you afford your temporary lodging and save a bit more for your down payment. It’s a privilege you wouldn’t have had if you had not yet sold your previous home.

Pros And Cons Of Buying A Home While Selling Your Current House

As with any real estate decision, buying a home while trying to sell your current residence comes with both challenges and benefits.

Pros Of Selling Before Buying A Home

If you sell your current home before buying a new one, you’ll gain a financial advantage. You can use the funds from your home sale to cover the down payment and closing costs of buying a new residence. You also won’t face the financial strain of making mortgage payments on your new home and – if you can’t sell it quickly enough – your current residence.

Cons Of Selling Before Buying A Home

If you sell your current home before buying a new one, you might find yourself without a permanent home as you search for a new residence that fits your needs. This means you might have to pay for a temporary living arrangement, such as renting out an apartment or single-family home until you move into a new permanent home. You might also have to absorb the costs of moving twice.

Pros Of Buying Before Your House Sells

If you buy a new home before selling your current residence, you’ll know that you have a place to move to once that old home sells. Buying before you sell also means that you can give your full attention to finding a new home that best suits your needs. You won’t feel as much pressure to buy quickly.

Cons Of Buying Before Your House Sells

The biggest disadvantages of buying a home before your current one sells are financial. First, you might end up with two monthly mortgage payments at one time. Make sure your budget can handle this. Secondly, you won’t be able to tap into the proceeds from your home’s sale to cover the costs of buying a new residence.

The Bottom Line: Develop A Buying And Selling Plan

The key to easing the stress of buying and selling a home at the same time is to develop a plan. This means creating and following a home buying budget, researching the neighborhoods in which you want to sell, taking the steps to get approved for a mortgage and building your savings in advance to handle the financial stress that comes with both buying and selling a home.

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Dan Rafter

Dan Rafter has been writing about personal finance for more than 15 years. He's written for publications ranging from the Chicago Tribune and Washington Post to Wise Bread, RocketMortgage.com and RocketHQ.com.