Selling and Buying a house at the Same Time

How to Buy and Sell a house at the Same Time

Timing is everything and when you are selling and buying a house at the same time you have to ask yourself one question:

Can you buy before you Sell?

If you are in the position to be able to buy a new home without having to sell your old home first that is the best situation to be in. You can shop for your new home at your leisure and when you find it you buy it right away. Then afterward you can get around to listing your previous home and sell it on your own time.

Unfortunately, most buyers are not in the financial position to do this, because the mortgage on the first house counts against your income to qualify for the mortgage on the second house while you own it, and the money for the down payment on the new house usually comes from the equity from the sale of the old house. Basically, only rich people or Downsizing buyers can hope to buy before they sell. Downsizing makes it easier to buy because it lowers the purchase price.  

When is it a good idea to USE A HELOC? If you are downsizing a HELOC can be a great option to buy with. For buyers leaving a big city market where prices are substantially higher than suburban communities in an area with milder climate (South Western United States) and a lower cost of living. Sometimes the equity is enough to buy the new home with it. Then you can buy before you sell using a home equity line of credit.

If the seller of the property you want to buy is willing to “Carry the note”, you can take seller financing when buying the first home while you sell the second home. Seller financing is not all that common but tends to resurface in high-inflation environments or during slow markets or rural areas with very low demand – seller carry may be the only financing available to some buyers. 

If you can’t buy before you sell – then you MUST SELL FIRST

If you are selling, you can try to set it up the sale either two ways:

-Sell AND Buy both homes simultaneously (concurrent close)

Or

-Sell your home first then buy.

Concurrent Strategies:

Write offers subject to sale of other property

Write offers subject to the sale of other property is your best friend when trying to close at the same time. It allows you to tie up a home, while you wait to sell your home. This contingency is stronger or weaker depending on how far along you are in the process of selling. At the very beginning, it is at its weakest, the property is not listed. At this point, the sale of the home is more of an idea than concrete reality. I recommend having your home listed before you start writing offers to show sellers you are serious. Also, when a property is not listed the seller doesn’t know how long it will take to get the home ready for market and what is its listing price? If the listing price is really high or unrealistic they may not want to accept the contingent on the sale of other property offer. In very competitive real estate markets where there are multiple offers, this contingency may not be accepted at all. The best chance of getting subject to sale of other property accepted is if a home has had no offers for a while, the seller may be willing to take a chance on a contingent offer if they don’t think something better is coming along further down the road. 

Bridge Loans – This lets normal buyers act like rich buyers and buy before they sell. Remember this is a loan, and the lender is using the equity of your home as collateral. The cash they give is to purchase a new home. Bridge loans are a specialty loan product and have higher interest rates and shorter terms than normal loans. The average loan term for a bridge loan is 6 to 12 months.

Seller contingency: subject to finding replacement property-  If you are concerned that you wont be able to find a place to buy and you would not consider renting as an alternative then this contingency is a good option. Don’t expect a buyer to stay around forever while you are shopping for a new home, they will usually stick around 30 to 90 days before moving on.

Dual Escrows – the idea behind a concurrent closing is to open two escrows, and move them along at roughly the same speed. Usually one will finish before the other one and you will have to wait a week or two for the other one to catch up. Then when they are lined up you can close them together. Loan Approvals do run out of time, but can sometimes be extended.  

Sell then Buy Strategies:

The good news when you sell your home is that you have the money now so you don’t need a contingency of other property when writing offers- the bad news is you might not have a place to live! Sell then buy strategies are usually about lengthening the amount of time you have to buy a new home or rent a property if don’t want to or you can’t find something you want to buy.

#1 Lengthen your Escrow

Usual escrows are 30 days, 45 days in slow markets. You can ask for 45 days or 60 days on the escrow, and then try to close early if you find something to buy right away. Asking for an extra 15 to 30 days usually gets appproved by buyer.

#2 Seller Lease Back

Seller leaseback of 30, 60, or 90 days gives sellers time to stay in the home they just sold as a rental, while they look for the home they want to buy. Rent is either the current market value or the buyers hold cost. 2 to 3 months gives a lot of time for home shopping, which is usually enough time to buy something. If you can find something to buy when your leaseback is up, you will have to rent.

#3 Purchase a new construction home.

If you can put the deposit down on the new construction home and reserve it, you have time to sell your current home while your new home is built.