Buying & Selling at the Same Time?

By
Real Estate Agent

How to Sell Your Home and Buy Another at the Same Time 

Being a move-up buyer can be tough in today’s market. Although deals are closing rapidly, there’s no guarantee that your new dream home will close at the same time as your old dream home. Selling and buying at the same time is a delicate dance, but it is doable. There are a few ways to pursue this plan:

 

 

1. Sell first, then buy. This is perhaps the safest plan, but it calls for multiple moves. In this scenario, you list your home and complete the transaction before purchasing another home. When you sell your home, you put the bulk of your belongings in storage and live in a temporary rental or, if possible, enter into a rent-back deal with your home’s new owner. The advantage of this method is that you know exactly how much you can spend on a new home, and you don’t have to worry about temporary financing. Also, without another home waiting in the wings, you’ll be less tempted to drop the price or to take the first offer that is below the asking price. The disadvantage is that it is a disruptive experience, and you could be displaced for a while if you are home-shopping for a long time.

2. Buy first, then sell. This strategy minimizes disruption. You can move into your new place at your leisure and then take time to prepare your home for sale. The major disadvantage is that, depending on how fast your old home sells, you could be shouldering the burden of two mortgages for some time. You are also responsible for maintenance and security on the vacant home. This scenario works best if your first home is already paid off.

A variation of this plan is to buy a new home with the plan to rent out the old one for a year. This buys you some time with money coming in, but being a landlord comes with its own stresses and responsibilities. You may also need to repair or renovate the home after it has served as a rental.

3. Buy and sell simultaneously. To execute this plan, you need to prepare for all contingencies and to know that if your timing is off, you will face one of the two scenarios listed above. The trickiest bit can be timing the financial burden. One option is bridge financing. This enables you to own two homes for a short amount of time. To do this, you need to either borrow money from family or obtain a short-term loan from a bank or other lending institution to span the time period between when you close on your new home and sell your old one. In essence, you are getting a short-term home-equity loan, also known as a HELOC, a Home Equity Line of Credit, on your present house and using it as a down payment on your new house. You then repay the loan when you sell your first home. It is not easy to qualify for a conventional bridge loan, since you have to demonstrate that you have enough money to pay for both mortgages for an indefinite period of time.

 

Experts advise applying for the HELOC well before you buy a new house. That way most of the credit on the line is unused until you actually need it. Lenders don’t like a HELOC that works only for a very short time, and it’s a challenge to get a HELOC if your present home is on the market.

Try to schedule the closing date on the sale of your old home after the closing date on the home you buy. In this way, you can stay in your present home until you move into your new home. Otherwise, you can attempt to negotiate a rent-back arrangement.

 

There is no right answer in choosing any of these scenarios. Your Realtor may be able to advise which is best, depending on the local market. However, much depends on your financial stability, as well as your tolerance for risk or disruption.

 

 

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Will Nesbitt 05/01/2014 12:40 AM
Topic:
ActiveRain Community
Tags:
selling
buying
real estate
homes

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Rainmaker
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Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

Well put.  I think that many clients have an issue with coordinating the situation.

May 01, 2014 12:35 AM #1
Rainmaker
1,325,451
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Connor, I've personally used the "bridge" loans before and that's worked out well, but certainly not always.  If you have the means I like purchasing the home you want then selling your current home...the various options are not a "one size fits all", but still good to have options. Thought I'd stop by and say hello after Debbie Reynolds shout out to you

May 04, 2014 08:40 AM #2
Rainer
35,754
Connor Dowd
Middletown, RI
2013 Newport Realtor of the Year

Thanks for the feedback Nick!

May 05, 2014 01:28 AM #3
Rainmaker
3,427,435
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hi Connor -- an age old question and you have presented the options in a very clear and concise manner.   

May 10, 2014 05:33 PM #4
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Rainer
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Connor Dowd

2013 Newport Realtor of the Year
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