Selling and Buying a House at the Same Time: How You Can Make it Work
original article by Jody Ellis and Christopher Rogacz can be found here.
In a perfect world, you can put your current house on the market, sell quickly to get your equity out of your home to use for a down payment, and find your next dream home just as quickly. In the real world, however, it’s not always that easy, and you can usually expect some overlap as you navigate how to sell and buy a house at the same time.
At best, you’re dealing with a bit of a juggling act with some element of risk, which can be very stressful. But it does happen, and it happens much more often than you might think. According to the National Association of Realtors, 71% of repeat homebuyers owned their previous residences, which means it’s highly likely that a considerable number of them did double-duty as both buyer and seller.
Knowing that it’s a common situation doesn’t necessarily make it any less nerve-wracking, however! That’s why we’ve spoken to top real estate agents and other professionals to create a guide that covers common challenges you could face and some alternate routes that might work better for you if you decide to sell and buy a house at the same time.
The challenges to selling and buying a house at the same time
When looking at trying to sell and buy at the same time, there are a few specific challenges that can make it difficult to tackle both transactions at once:
Funding your new house
Unless you happen to have a lot of cash on hand, it might be difficult to come up with the money for a down payment while your equity is still tied up in your current home. According to information collected by CoreLogic, a property data provider, homeowners averaged an equity gain of more than $56,000 in 2021.
But having a lot of equity in your home doesn’t mean you have immediate access to it – you’ll typically have to sell your house and close on it before you can use that money as a down payment on a new home.
Complicated logistics
Managing the logistics of either selling a house or buying a new one can be complicated enough, and when it’s all happening at the same time, it can feel completely overwhelming.
“The logistics include timing the purchase and the sale, negotiating with both sides on moving or possession dates, and organizing belongings to get ready for the move,” said Mike Qui, owner of Good as Sold Home Buyers. " This is where a good real estate agent can help take some of the stress away from the homeowners.”
Contingencies
Some homeowners may decide to make their offer on a new home contingent on the sale of their current home. In this scenario, there’s a very real possibility that your offer might lose out in favor of a non-contingent offer. “If this happens, you have to decide whether or not you want to remove your contingency,” says Erik Jacobs, a real estate attorney with Cicero, France, Barch & Alexander, P.C. “This is risky and not always financially feasible.”
With these challenges in mind, let’s take a look at everything you can do to make selling and buying a house at the same time a more seamless process.
"The challenge used to be getting a buyer to agree to allowing the seller to stay in the home past the closing date. In this seller-centric market, buyers will often let sellers stay and will agree to a delay of 30-60 days."
~ Rick Ruiz (Real Estate Agent)
If you decide to sell first…
The good news about selling first is that current market conditions in 2022 tend to give sellers a bit more control than in years past. According to Las Vegas agent Rick Ruiz, who completes more sales than the average agent in his area by 14%, sellers are now in the driver’s seat when it comes to occupancy timelines.
“The challenge used to be getting a buyer to agree to allowing the seller to stay in the home past the closing date,” he says. “In this seller-centric market, buyers will often let sellers stay and will agree to a delay of 30-60 days.”
Even though you might have some control when it comes to selling your current house, you still need to get a buyer in the first place! When you start thinking about listing your home, make sure these key bases are covered to help make your sale go quickly and smoothly:
Clean, declutter, and stage
This is the time to purge your house of any unwanted items, as well as doing (or hiring out) a deep cleaning, to include carpets and floors. Remove personal items from display, to include those family photos you love – buyers want to get the feel of living in the house themselves, not see evidence of other people living there.
You should also try to move extra furniture and boxes into storage or to the garage, which can help create a sense of space and openness. Buyers gravitate to spaces that are organized and clutter-free and that showcase the home’s day-to-day functionality.
Take care of any outstanding maintenance or repairs
Deferred maintenance or repairs should be taken care of before you list the house if possible, as it can not only make the house look more attractive to buyers, it can expedite the sale process. Some sellers will even order their own inspection prior to putting their house on the market, especially if they know the house needs significant work.
Decide on contingencies
Will you need extra time after your home sale to complete the purchase of your new home? If so, you’ll want to decide what kind of contnigency you plan to include with the listing.
As Ruiz states above, it’s not uncommon these days for a seller to ask for either a rent-back option, where they rent the property back from the buyers for a period of time, or to make it a condition of the sale that they have 30 or more days after closing to actually vacate the house.
Price to sell
Setting the right price for your house isn’t just an important part of bringing in buyers, it can also affect your new home purchase. Price your house too low, and you could undervalue its worth, leaving you with less money for your next down payment. Price it too high, and you could lose potential buyers altogether, or run the risk of the appraisal coming in low and putting the deal in jeopardy.
Caleb Liu, owner of House Simply Sold recommends pricing the home in line with or even slightly below market value to get multiple offers, then choosing the most dependable offer with the fewest contingencies.
Or sell immediately with a cash buyer
If you’re looking to sell your home quickly and simply, Homelight's Simple- Sale platform allows you to sell your home in a matter of weeks rather than months. You can get a competitive offer, while skipping the hassle of repairs, open houses, and negotiating with buyers.
HomeLight’s Simple Sale platform can be a stress-free way to get your current house sold, so you can move on to buying and enjoying your new home. It eliminates the risk and uncertainty of a traditional sale falling through, and you won’t have to worry about additional fees, commissions or upfront costs.
Plus, you can pick a move date that works for your schedule (up to 30 days of closing), which gives you some lead time to get into your next home.
Plan for a possible gap period
While selling before buying removes the risk of overextending yourself financially, it also means you’ll need to secure some kind of housing until you find your next home. You could try to find a buyer who will allow you to do a rent-back on the property, but if that isn’t available, you may need to move into a temporary rental property.
If possible, try to sign a month-to-month lease on a single-family home with enough space for all your belongings,” suggests Liu. “Be upfront with the landlord or leasing agent and tell them that you intend to leave after several months.
Not all listings are willing to accommodate this, so your options will be limited, and the monthly rate might be increased, but this is better than breaking a 12-month lease and having to pay penalties.”
Partner with an experienced agent
Working with an experienced agent is one of the most important parts (if not the most important part) of selling and buying a house at the same time. HomeLight's Agent Matching platform can help you connect with an agent who has experience in your local area and the expertise needed to transition from selling to buying.
Top Virginia Beach agent Anna Paduhovich says that a reputable agent will aggressively market the home and help sellers get the most out of the sale. “It’s especially important in a competitive market where there are multiple offers,” she explains, “a good agent can give you an advantage in getting to a successful closing.”
If you decide to buy first…
You’ve found your dream home that checks all of your boxes, but your home hasn’t sold yet — and perhaps isn’t even listed. In spite of this, you might decide that you simply can’t pass up the chance to pursue a special or unique property.
According to Paduhovich, it used to be more common for clients to sell first, then buy, but a new normal seems to be taking hold in 2022.
“This might be due to more people working from home — some of them permanently — and finding that they need more space than before,” she says. “Or maybe after being home for so much time, homeowners are realizing they don’t like their neighborhoods or surroundings and are anxious to make a change without waiting around for a sale.”
Here’s how to navigate the buying-while-selling process while keeping the stress and risk at a manageable level.
Figure out your finances
Before you jump into house hunting, you’ll need to determine whether or not you can afford to buy first. Remember, the equity in your current home won’t be available to you until you close on the sale, so you may need cash reserves that can cover the down payment on the new house.
Or you may be able to use a bridge loan, a form of short-term financing that helps bridge the gap between buying and selling (more on this option in a minute).
If you do decide to buy a home first and your previous house doesn’t sell right away, you might end up on the line for two mortgage payments, which can be difficult to juggle. Travis Steinemann, a property investor with BuyHousesBR notes that buying first isn’t going to be good or viable for everyone.
“If you’re living paycheck to paycheck, this isn’t for you,” he says. “But if you earn a strong income and have low monthly debts, you can likely utilize this option.”
Take a look at your current home’s potential value
Early on, it’s important to get a ballpark idea of your current home’s value. HomeLight's Home Value Estimator can help with this, by giving real-world home value estimates in just a couple of minutes.
We’ll ask you some questions about your home, and pair your answers to housing market data from multiple trusted sources. Once you get your value estimate, we’ll help you connect with a top local agent, who will help you develop a smart pricing strategy and will give an accurate value based on a comparative market analysis.
Talk to a trusted agent and lender on how to sell and buy a house at the same time
Paduhovich advises that it’s best to consult with a trusted real estate agent, who can then help you talk to a lender about your situation.
“The lender will look at what your current house is likely to sell for, what your payment is, and what you want to spend on the next house,” she says. “They’ll also look at your debt-to-income ratio to determine whether you can get preapproval for the loan before selling your current home.”
Consider a bridge loan
If you don’t have enough available assets to cover your down payment, you could talk to your lender about a bridge loan. Bridge loans are short term loans that you secure with your current home’s equity, in order to use that equity toward the down payment on your new house.
These types of loans are kind of like an advance against your equity, a “bridge” between the time you buy a new house and sell your current house. They can be a good solution, but because they are intended to be short term, interest rates tend to be higher.
You’ll also want to keep in mind that lenders have shorter loan terms on these kinds of loans – you’ll be required to pay the full loan amount back within six months to a year, and the terms usually involve a lump sum payment once the funds are available from the sale of your home.
Be flexible with contingencies
If carrying two mortgage payments is too much of a stretch, one possibility is to make a contingent offer, which includes a condition that you’ll only buy if your current home sells. If it doesn’t sell, the contract states that you won’t lose your earnest money. While this eliminates your financial risk, it also weakens your offer.
The 2021 housing market made contingencies tricky, and even though the 2022 market seems to be stabilizing somewhat, it’s still very common for buyers to have few, or no contingencies at all. Buyers are waiving appraisals, waiving inspections – in short, doing everything they can to make their offer competitive and alluring to sellers.
“If a seller has one offer that is cash with no contingencies, and another offer that is a little higher but has an inspection contingency, financing contingency, and a contingency on the sale of their current home, they will go with the cash offer every time,” notes Steinemann.
Says Ruiz, “Even new home builders won’t allow for contingent sales now, unless you use an iBuyer company that they’re partnered with.”
This doesn’t mean you can’t add a contingency to your offer, but you’ll want to talk to your agent about the best way to handle it. “Contingencies are still necessary and are used every day,” adds Ruiz. That’s why it’s so important to work with a seasoned agent who can navigate everything that this involves. It’s not the best to be a contingent buyer, but with good negotiation skills you can usually make it work.”
Making selling and buying at the same time work for you
While no one ever said buying and selling at the same time was easy, it is doable. If you decide to sell first, HomeLight's Simple Sale platform can be a great option in finding a cash offer for you that you can use as a down payment for your next home. Or, if you decide to buy first, use our Home Value Estimator to plan for how much your house will likely sell for, and how much new house you can afford.
Most importantly, partner with an expert agent to guide you through the process, and you’ll be in a much better position to pull it off while keeping the risk and stress to a minimum.
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