Things can get complicated when you’re trying to sell your home and buy your next place at the same time. The process of buying and selling at the same time can be stressful, especially if you want to put the proceeds from the sale of your current home into your new home.
In a perfect world, your next home would be waiting to be ready as soon as you hand over the keys to your old one. But of course the world isn’t perfect and the times between selling one and buying another don’t always line up the way you want them to. Take heart, because a little planning and working with a skilled real estate agent can help both transactions go smoothly.
Here are five key topics to consider, along with tips for managing the process — and maintaining your good health.
- Partners: Gather a team of experts
- Money: Consider your financial position
- Market: Does it favor buyers or sellers?
- Time: Negotiating not only the money but also the schedule
- Safety net: Have a backup plan
1. Partners: Gather a team of experts
Considering all the steps and paperwork involved in selling and buying a home, you want experienced professionals in the process. Hiring a skilled real estate agent can give you an accurate estimate of home prices in your area and how to value your current home. Using that figure, you can calculate how much equity you have and what your net income will be, so you can apply the money toward your new home’s down payment and closing costs.
“Working with a truly experienced Realtor makes a big difference,” says William Fastow, associate broker at TTR Sotheby’s International Realty in Washington, DC.
Using the same real estate agent and real estate attorney (if applicable in your area) for both the sale and the new purchase will make the entire process go more smoothly.
2. Money: Consider your financial situation
Ideally, you can close all at once, selling your home in the morning and closing on your next place in the afternoon – or at least within a few days. But what if things don’t go according to plan? You may suddenly find yourself without the money necessary to close on your new home, or end up paying off two mortgages over a long period of time. Worst case scenario, you may not be able to get final approval for a mortgage and lose your next home.
If you don’t have the means to handle two mortgages at once, you may want to include a contingency in your offer that gives you an escape route if the sale of your current home falls through. If your new loan is tied to selling your current home, you may want to consider adding a financial contingency. A good realtor can help you make the right decisions for your needs.
3. Market: Does it favor buyers or sellers?
When trying to buy and sell a home at the same time, a lot depends on the state of the housing market in your area.
In a seller’s market
In a market like today’s, where buyers are competing for record-breaking inventory, sellers dominate. But even in a seller’s market, if you want to bring in top dollar, you need to get your home ready for the market. This type of market also means you can be more selective about which offers to consider and your options for those with a small emergency. If the property is properly marketed and well prepared, it will sell quickly. So make sure you’re ready to move quickly when shopping for your next place.
In a buyer’s market
On the other hand, it can take longer to sell your home when buyers are in the driver’s seat. In a buyer’s market, you may want to hold off on making an offer on your next place until you’re under contract with a solid buyer for your current place. You may also want to include a deal-breaking contingency for peace of mind if the sale of your current home doesn’t go through.
4. Time: Negotiating not only the money but also the schedule
Of course you want to get the best price on the sale of your home, and not pay for the next payment. But consider the timing of the closing process when negotiating both deals. The goal is to get the buyer of your current home and the seller of your next home to agree on closes or any other important contingencies.
“When I’m making an offer to a client, I’m making it clear that we have to close that day,” says Mark Pierce, a Realtor with Berkshire Hathaway Home Services in New Canaan, Connecticut. “If this day doesn’t work out, we may have to find another opportunity. Making sure you can close on the same day is a big part of our contract negotiation.
5. Safety net: Have a backup plan
No matter how carefully you plan your transactions, surprises can happen. They may not be on schedule – or they may fail completely. If you have contingencies in your contract, you should be able to postpone the closings accordingly or walk away with minimal financial pain.
But just in case, it’s wise to have a backup plan. Here are some options:
- If you’ve sold your current home but haven’t found your next place yet, you’ll need to find a short-term rental. Be sure to factor in the additional cost of renting a storage unit if all of your items won’t fit into the rental.
- Or you may want to consider asking your buyers to enter into a rent-back agreement, which allows them to stay in your current home for a short period of time after closing and pay rent to the new owners until they can move in.
- If you close on your new place without selling the old one, you’ll have two mortgages to pay. To cover expenses until you can sell, consider a home equity line of credit or a short-term loan. (If you use a bridge loan, you are responsible for making payments whether or not your home is sold.)
- Or you can try to rent out your home and use the income to cover the costs until you can sell the new place.
Trying to sell your home and find a new place at the same time can be very challenging. Working with an experienced real estate agent can help ease the transition and ensure consistent communication with all parties involved. Finally, be sure to keep a close eye on your finances and credit both before and during the process. When it comes to finding your next home, you want to be able to act quickly.