Planning on buying a new home? Then you’re probably going to want to sell that old one, too. And having closed at least once before, you may have some concerns about double the work that comes with selling AND buying. What steps do you take to prepare? Should you sell or buy first? The good news is we’ve provided pointers to make this process as painless as possible. Out with the old, in with the new.
First things first
- Consult your real estate agent early: They can help you understand many things, including the value of your current house, the right time to sell, and all of the paperwork involved with closing. And with their knowledge of the market, they can help you negotiate the sale of your old home and the purchase of your new one. Plus, they can help you understand what repairs and/or maintenance you need to take care of with your current home before you sell it.
- Learn the market: Every factor of this process will rely on it. Maybe your home isn’t worth as much as you thought – or, maybe now is the best time to sell it. Also, what are current interest rates? Low enough to put that house you’ve had your eye on in reach? The market can be unpredictable and unforgiving – that’s why it’s important to follow it closely and stay in the loop.
- Understand your finances: It’s important knowing what you can afford, and if you need to get the money for your current home before you can put a down payment on your new one. Getting prequalified or preapproved can help.
Now, it’s time to decide which closing you’re going to plan first. Here are a few things to consider.
Selling before buying?
This may be the right plan of attack for you – especially if it’s a seller’s market. You’ll have the upper hand and can most likely set the asking price to your liking. In addition, you’ll know how much money you have to work with before buying your new home. Plus, you’ll avoid having the financial burden that comes with paying two mortgages.
One downside of selling and then buying is finding a place to live and keep your possessions before buying a new home. Not to worry, you have a few options.
- Rent-back agreement: This allows you to stay in your home after you sell it. The new homeowners are essentially your landlords, and you’ll agree on how long you can stay and how much you’ll pay.
- Contract contingency: With a contract contingency, the sale of your old home will hinge on when you close on your new one. However, it’s important to note that the party buying your home will need to be flexible in order to agree to this.
- Rent another property in the interim: If the first two options fail, see if you can find a rental property that will cover the gap between homes.
Buying before selling?
This isn’t usually suggested, as it could mean having two mortgages. However, you might take this route if you’re still waiting to sell your home – but find one you really love and don’t want to risk losing it to another buyer. However, if you find a flexible seller, you could set up a contract contingency for this, too. The purchase of your new home will hinge on the sale of your old one.
Remember, when it comes to buying and selling a house at the same time, there’s no right or wrong way to go – everything’s circumstantial. So do your homework, and when the time comes to decide, you’ll be ready for the process – from selling to the closing table.
Ditech is not a financial advisor and the ideas outlined above are for informational purposes only. They are not intended as investment or financial advice and should not be construed as such. Consult a financial advisor before making decisions regarding important personal financial matters.