Successfully sell a house and buy a house are significant achievements in their own right, but when their timelines intersect, it can be difficult to manage both. If you’re considering doing both at once, it’s just as important to understand the steps you can take to make the process go smoothly, as it is to have a backup plan in case it doesn’t. Above all, the balancing act required to close both deals emphasizes the importance of working closely with a trusted and experienced broker.

Do I buy or sell first?

One can imagine a perfect world where the two trades run in close succession. However, this is usually not the case. So, should you list your current home first or start listing offers for a new one? There are pros and cons to both.

By first selling your current home, you can bid on a new home with cash in your pocket, increases your purchasing power, and avoids having to juggle two mortgages at once. On the other hand, it creates a housing gap that often leaves homeowners wondering: where they stay until they move in their new home or that they may have to rent before they can buy again. Sellers can also negotiate a lease back with the buyers, which allows them to rent the home from the new owners before moving in.

Buying for sale solves the need for temporary housing and makes the overall moving process much easier. Having pre-established a home means you only have to move once, which can save you a lot of stress during this transition period. Conversely, buying a new home before selling your current one will put an extra strain on your finances. Having two simultaneous mortgages equals taking on more debt, which can result in less favorable loan conditions for the purchase of your new home. Without the lump sum generated from the sale of a home in your pocket, it can be challenging to find enough money for a down payment and obtain private mortgage insurance (PMI) may be in the cards. Finally, buying for sale involves an obvious assumption: that your current home will be sold.

Ultimately, the order of operations depends on your situation. Perhaps you are moving due to a job change and need to focus all your energy on buying a new home by a certain date before you can even think about selling your current home. Whatever route you take, it’s important to pass your timeline on to you listing agent or your purchase broker: so that they can strategy accordingly.

Buying and selling a house at the same time

Local market conditions

Buying and selling at the same time entails a certain duality: at every step in the process you must weigh up your responsibilities as buyer and seller. For example, when assessing your local market conditions, then you are not looking at one, but at two housing markets.

  • Seller’s Market: Sell ​​in a seller’s market means you should be prepared to move as soon as you are on the list as you may be looking at a short sale timeline. However, relying too much on the assumption that your home will sell quickly can make things tricky. If you buy from a seller’s market, finding a new home may take longer than expected. You may wait weeks or months for an offer to be accepted.
  • Buyer’s Market: Selling in a buyer’s market usually means that houses stay on the market longer. If you continue to purchase a new home just after listing your current home, be aware that it may take some time to sell. When you buy in a buyer’s market, you can afford to be picky, knowing that time is on your side. With fewer people buying a home, sellers will be more flexible, giving you leverage to negotiate your contingencies.

Have a backup plan

If only you could wave a magic wand and make both trades go according to plan. That’s why it’s important to have a backup plan to put the ship right if things go sideways at any point in the buying or selling process. Talk to your broker about which options are right for you. Here are a few:

  • Unforeseen sale: If you buy your new home with a condition of sale, you can opt out of the purchase contract if your home is not sold by a certain date. Purchasing dependent on sales is rare in highly competitive markets.
  • Bridging loan: If your current home has not yet been sold and you are unable to pay the down payment on a new home, a bridging loan may be a suitable solution. Bridging loans can be used to cover the down payment on a new home and are repaid once your existing home is sold.
  • Rent-Back Agreement: A lease repurchase agreement is a clause in the sales contract that allows the seller to rent his old home from the buyer for an agreed period of time before the buyer moves in. This can be especially useful in situations where the seller is having trouble finding a new home.

Contact an experienced Windermere estate agent today for more information on buying and selling a home by clicking the button below.