Here you are, hoping to master one of life’s more difficult juggling acts: buying a new home while selling your current one. Sure, things can get a little overwhelming during the process. But here’s the thing – it’s totally doable. This how-to post will ease your worries and put you in the best position to conquer buying and selling a house at the same time.
The Need to Know Essentials
Regardless of whether you’re buying or selling first, there are key areas to take into account. So, first thing’s first: Put these three things on the top of your to-do list.
- Become one with the market: Maybe your home isn’t worth as much as you thought, or maybe now isn’t the best time to sell it. Or maybe interest rates could be on the rise soon. The market can fluctuate frequently, so keep your ear to the ground.
- Hire and consult your real estate agent: When you find a trusted and competent real estate agent, he or she can help you put a value on your home, give you pointers on the right time to sell, update you on the maintenance needed, and assist you with buying your next home.
- Understand what you can afford: This is where getting preapproved for a mortgage can be a huge help. A preapproval will determine what you’re qualified to borrow, as well as your loan eligibility.
How to Sell Before You Buy
Selling first means you don’t have to carry two mortgages simultaneously, but it may make moving a tricky process. This section will provide you with information to consider if you decide to sell your home first before buying your next one.
Make a settlement contingency
With a settlement contingency contract, you put your home on the market and immediately start house hunting. Once you find a home worthy of an offer, you can include a contingency contract, which says your offer depends on your current home selling by a certain date. If it doesn’t sell by that date, you can pull out of the deal.
Keep in mind: Sellers are typically hesitant to accept offers with this type of contingency (especially if it’s a newly listed home) because it puts them at risk if you were to pull out of the deal. So, prepare your expectations accordingly as you begin to house hunt.
Have a rent-back agreement
Here you would essentially complete the settlement process and pass the ownership of the home off to the new party, but you’d stay in the house as a renter for an agreed-upon time period (usually a maximum of 60 to 90 days). You’d make rental payments to the new homeowners or offer them a lower selling price. This option can give you additional time to find and buy your next home without having to immediately relocate.
Find a short-term rental
You can always rent a house or apartment in the interim while you look for your next home. It’s a bit of a hassle, especially with moving all of your belongings, but it enables you to make an offer on a house without having to make any of the aforementioned agreements.
How to Buy Before You Sell
Buying first means you can take your time with the move, but you’d be carrying two mortgages at the same time, which you’ll need to be qualified to do. This option can increase your debt-to-income ratio when you apply for a loan. However, you might take this route if you’re still waiting to sell your home but have found a house you really love and don’t want to risk losing it to another buyer.
Extend the closing date
This is like a contingency contract, but without the contingency. If you and your agent are confident you’ll be able to sell your home in a short period of time, you can ask for the closing on your new home to be a flexible date – meaning, weeks more than the standard 30-45 days.
Make a sale and settlement contingency
This is essentially the opposite of the buyer contingency. Here you can look for a home first, make an offer with a sale contingency, and then put your home on the market. Maybe you’re worried your home is going to jump off the market so quickly (like in a seller’s market) that you won’t have time to find your next home first. A settlement contingency will make this type of situation easier.
As discussed earlier, it’s important to know that sellers might not be so quick to accept a deal with contingencies.
There’s no one way to buy and sell a house at the same time – it all comes down to your circumstances. Hopefully by this point, you’ve zeroed in on a couple of options to explore further and have realized this juggling act is nothing you can’t handle.
And, once you’ve found the right home, it’s time you put your mortgage preapproval to work. Download this guide to learn more about the timeline of your mortgage application.