Selling and buying a home at the same time is difficult in just about any market. It's not just a matter of logistics and coordination, although that's part of it. It's also difficult because to close concurrently, somebody is taking a risk, and that person is often the seller of your new home.
There is no right or wrong method when it comes to how to buy and sell a house at the same time. Your options vary depending on what you can afford and how much risk you're willing to take on. It also depends on whether you're dealing with a buyer's market, a seller's market, or both if you're moving from one city to another. Here some ways you can approach this situation.
- If you can afford to, buying a new home before you sell your old one is often the easiest strategy, but this requires significant cash on hand.
- If you sell your home first, you may be able to rent it back from the new owner for 30 to 60 days while you buy and close on a new house.
- If you buy with a contingency to sell, you can pull out of your new contract if your old home fails to sell in a certain period of time.
- Buying with contingencies may weaken your offer in a competitive market.
Buy a Home First
If you can afford to own both homes at the same time, and a lender will qualify you, you might want to go ahead and find the home that you want to buy first. Part of qualifying to own two homes involves showing you can afford both homes. For example, you could show that you have six months of payments for both homes in the bank.
Apart from showing that you can qualify to own two homes at the same time, you will also need the money for a down payment and closing costs. You can borrow the money or tap a savings account. Using funds on hand means you won't have to pay interest, but it also significantly depletes your savings.
Once your new home purchase is completed, you can move in and put your old home on the market. If it doesn't sell, you could rent it out until the market improves.
Talk to one or more lenders early in the process to see what home loan options you qualify for.
Rent Your Home Back After It Sells
You can ask the people who are buying your home to let you rent it back for 30 to 60 days after closing. This is called a rent-back contingency. Not everyone is going to agree to this, obviously, but it's an option worth asking about. This gives you time to buy and move into another home. On the plus side, you wouldn't have any contingencies on your new home purchase because it's already sold. The drawback to renting back your home is that you're on a deadline, and if your purchase doesn't go through, you still have to move.
Time Everything to Avoid Contingencies
Once the home you're selling is ready to close, you might be able to delay the closing and write an offer to buy your new home without a contingency to sell. When the buyer for the home you are selling is fully approved by their lender, you can be relatively sure that the sale will go through.
If you and your real estate agent are confident the buyer will follow through with buying your home, you could delay the closing to close concurrently with the date you close on your new home. Of course, the buyer needs to be willing to delay. The risk to you in this situation is that if the buyer doesn't close, you could still be obligated to close on the home you are buying.
Selling First and Buying Second
This option is probably the least stressful because there is less at risk than with any of the other options. The benefit is that you'll know exactly how much money you will net from the sale of your home because the sale has closed. The drawback is that you have to move out at closing, and since you haven't bought a new home yet, you need a place to live and somewhere to store your things.
Some people put all their belongings in a storage unit while they stay at a hotel or with friends or family. Others will rent a new place on a 30-day month-to-month rental agreement, which gives them flexibility as to when they will move. But no matter how you look at it, you still need to move twice with this option.
Buy With a Contingency to Sell
For many people, this is the ideal scenario. You put in an offer on a new home, and closing is contingent on finding a buyer for your current home. You only have to move once, and you don't have to worry about carrying two mortgages.
Some sellers are willing to wait, but it depends on the seller and on market conditions. A home sale contingency also weakens your offer. If you're competing with a buyer who doesn't have any contingencies, the seller is likely to go with the other buyer. Ask a knowledgable real estate agent about the odds of buying a home with a home sale contingency.