Did you know buying a house is considered one of the top three most stressful events you’ll face in your life? When buying a house while selling yours things can get complicated quickly. You need to time each closing date, and understand if you can pay two mortgages, all while also trying to pack and prepare your current home for showings.
Take a deep breath. This complete guide outlines the process of buying a house while selling yours, to make the overall experience so much easier.
Know the market
Start by understanding the current housing market in your area. There are a number of factors that affect the housing market nationwide. Start by finding a real estate agent who is an expert in your market. Their knowledge can make the process of selling your home while trying to buy a new home exponentially easier. With that, the best course of action depends on the type of market you’re in: buyers or sellers.
In a buyers market, your home likely has a number of other homes to compete with. Thus, it’s very important to ensure your house is priced correctly.
In a sellers market, you’ll likely sell your home quickly if it’s priced accurately. However, it can be very challenging to buy a home due to high competition from other hopeful buyers. If this is the case for you, keep an open mind and consider a variety of home buying options. By making a list of must haves in your new home, you can identify a number of houses you like, to give yourself more options.
Buying a House While Selling Yours
At this point, you’ve probably considered buying before selling your home, and vice versa. Both options come with a list of pros and cons. Uultimately you should choose the option with the risks and rewards you’re most comfortable with.
Get Ready to Buy
When you move within the same city or area, you can use the same real estate agent to buy a new house and sell your current house. However, buyers moving a longer distance will need to find a new agent. Or, ideally use a brokerage like Trelora with agents in markets across the country. This agent should be an expert in your new location to help you find a home to meet your needs in that area. A good agent should even be able to assist you in finding a place to live between selling your home and buying a new one if the need arises.
If you’re buying in a seller’s market, it’s important to move quickly. It may be a challenge to see homes in person before submitting an offer so be prepared with your list of non negotiable to ensure you know what you’re getting in a home
Buying a house before selling yours
Buying before selling your current home comes with its advantages. One of the biggest being it makes moving much easier, and you avoid storing your stuff. If you are buying a house while selling yours, buying first is a great option for those relocating to a new city by a specific date. By purchasing a home before selling your current one you can ensure you have a place to live by the necessary date.
However, buying a house while selling yours has its risks, too. This affects your debt-to-income ratio, and mortgage lenders pay close attention to this number. Thus, it can be difficult to qualify for a new mortgage. Plus, you need to be prepared for the possibility of managing two house payments for a while. With that, you also need to have a down payment for the new home. Consider what your budget is if your income is largely tied up in your old home’s mortgage.
Get Ready to Sell
A good real estate agent can provide recommendations to prepare your home to sell. These will likely include necessary repairs and decluttering. Then, schedule a time for professional photos, and discuss with your agent their plans to market your home and hold open houses.
Selling before buying a new one
When buying a home while selling yours, many people choose to sell first. Selling first often makes sense because it makes getting a mortgage for a new home easier. By selling before you buy, you free up funds to use towards the downpayment for your new home too.
But, it also means finding a place to live for a brief period of time. If you have pets or small children, you’ve probably already thought about what a challenge this could be to your sanity. With that, you need to be prepared to move twice as well, which means double the cost of moving.
Buying a House While Selling Yours: Financing
In a perfect world, when buying a house while selling yours, you’d be able to have concurrent closings. This is when you sell your current home in the morning, then close on your new buy in the afternoon, or within a few days. This is definitely possible, but is not always the case. If your situation is different and timing is a challenge, there are a few options to consider.
This clause states that your offer is pending the sale of your current house. If your current home doesn’t sell within the defined time frame, you’re free to back out of the deal without any consequences. This is a clause you can add to your financing as well. But, it’s important to note that not every seller will agree to this in an offer, especially in a sellers market.
Rent old property
If you’ve bought a new home, consider renting your old home to cover the cost of that mortgage. Some home owners even choose to Airbnb their home as a short term rental and make a profit while looking for a permanent buyer.
Alternatively, if you’ve sold your home and need a short term place to live, consider a rent back agreement with the new homeowner. This allows you to remain in the home after the buyer takes ownership, and simply pay an agreed upon fee for a period of time.
You’ve got options when it comes to the financing needed when buying a home while selling yours. Below are just two ways to secure financing, but there are a variety of other programs and financing options.
This loan allows buyers to borrow up to 80% of your current home’s value, in order to pay off the existing mortgage. Then you’re able to put any remaining money towards your new home’s down payment. You can also use a bridge loan as a second mortgage in order to secure funds for a down payment. This option does come with high interest rates. So, be sure to speak with your lender before making a decision.
Home Equity line of Credit
This allows you to draw cash for your new home’s down payment. Buyers must have HELOC in place already, otherwise a lender won’t approve the line of credit if your home is already on the market. Sometimes a line of credit can take longer for approval than a first mortgage. So, if you go this route, get started sooner rather than later.
A New Way to Buy and Sell
Typically, buying a house while selling yours is a complicated, stressful process. Today, there is a new player on the field of homeownership: the iBuyer. A variety of iBuyer companies provide financing so hopeful home buyers can make a cash offer on their next home before closing on the sale of their current home. Ultimately, helping buyers get their offer accepted in a competitive market, and sellers avoid paying two mortgages at once.
For example, Trelora, a modern real estate brokerage, partners with iBuyer companies to help buyers submit cash offers, and with sellers to get more offers on their home and close quicker. Some iBuyers allow you to close on a home in as little as 14 days. They eliminate the need for countless showings and open houses, plus you can choose your closing date. This makes a concurrent closing, and the convenience of it, a real possibility.
iBuyer’s are quickly growing in popularity, but be sure to check whether their services are offered in your area. Trelora can show you the variety of options for buying and selling that exist in your local market. Plus, whether iBuying is an option or not, Trelora is full service real estate, for a fraction of the cost of a traditional agent.
The Bottom Line
There are pros and cons with every circumstance of buying and selling a home. It’s important to assess your family and financial situation to make an informed decision.
If you’re feeling stressed or overwhelmed with buying a house while selling yours, speak to a professional real estate agent. They can help you understand your options, and choose the best route for you and your situation.