Buying and selling a house at the same time can be a balancing act. These steps help you avoid two mortgages and stay organized.
Buying a new house and selling an old house simultaneously can present problems when preparing to move. The biggest challenge is avoiding two mortgages, so you’ll need to carefully plan out how to sell your current home and buy a new house.
The first step is figuring out what the current market value is for your home and what your neighborhood inventory looks like. You should also start thinking about necessary repairs or staging the home to get it ready for potential buyers. Or, if you choose to go the off-market route, you’ll want to think about a good price for your house.
You should also address finances. This includes how much equity you have in the house, especially if you need cash to help with the down payment of your new house. Below are a few tips for how to buy and sell a house at the same time.
Buy a house with a sales contingency
The key to buying and selling a house at the same time is flexibility. You’ll want to try to time the purchase and sale as close together as possible, and doing so requires dealing with parties that are willing to work with your timeline.
One way to do this is by creating a sales contingency. A sales contingency is an offer to buy a house that basically says that if you don’t sell your house by a certain date, you can back out of the contract.
In a seller’s market, it can be harder for you to compete with other buyers who don’t have sales contingencies. But a sales contingency protects you, the buyer, from paying two mortgages.
Get your credit score in good shape
Check your credit score and make sure it’s in good shape before moving forward. If you need to bring your score up, be sure to give yourself some time — at least three to six months — to improve it. Simple changes such as paying off debt or making on-time payments can make big differences in your credit and your debt-to-income ratio.
An excellent score means you’ll be able to secure the best rate on a loan. This will help should you need to finance your new house with a mortgage.
Then talk to a mortgage lender and get pre-approved for a mortgage. If you’re going to dip into your savings for the down payment, figure out how much you want to allocate.
Seller’s market: Supply vs. demand
Market conditions are dictated by supply and demand. Your transaction’s timing could be influenced by whether it’s a buyer or seller’s market and what the current market conditions are in your new area.
Sellers in hot markets will likely get multiple offers because there simply aren’t a lot of homes on the market. This can be challenging if you’re looking to buy a home, especially if you’re on a tight schedule.
However, this can be helpful if you’re looking to sell your house quickly and the demand in your local area is scarce.
You can also be more selective about what offers to consider and limit your options to those with fewer contingencies.
A buyer’s market is the opposite. Too many houses are on the market and not enough people are snatching them up quickly. In this situation, your home may take longer to sell.
Prepare your house to sell
If you need to make fixes in your house, address those quickly before you put your house on the market. These may include:
- Applying a fresh coat of paint
- Sprucing up landscaping
- Fixing and making needed repairs, such as the gutters or replacing the garage door
Don’t forget to declutter and make sure your house is ready for people to come in and view it in an open house.
Read more: How to Get Your House Ready to Sell
If you’re waiting for your house to sell or if you don’t have the funds to put on the down payment of your new home, consider a bridge loan to help you out. A bridge loan allows you to purchase a new home and then go back and market and sell your current home.
This is a relatively high-interest loan that can be used to fund the down payment of your new house. The loan can be repaid after your house sells.
A bridge loan is beneficial because it allows you to purchase a new home before your current home sells. The con is that you’re taking on more debt that needs to be repaid quickly and payments will be larger than a long-term loan.
Use a home equity loan to purchase
A home equity loan, also known as a HELOC (Home Equity Line of Credit), gives you access to your home’s equity so you can use it for a down payment on your new house. The loan creates a lien against your house and decreases the actual equity you have in your home.
Be careful when pulling out a HELOC, as it comes with many provisions. Your lender could potentially ask you to repay the entire amount of the loan within a few years. If this were to happen and you don’t have the funds to cover it, it could force you to foreclose on the house.
There are a number of other ways you may be able to use your current house to tap into extra funds. Check out this handy guide on how to use your house to free up cash.
Get all of your questions answered
Research and doing your due diligence are crucial for buying a new house and selling your old one. You can always talk to a real estate professional and a lender to help you through the home-buying and selling process.
Selling off-market is also an option if you’re pressed for time or don’t have the money to make necessary repairs. One of the advantages of working with Sundae, for example, is that we offer an extremely flexible closing timeline of as little as 10 days or as many as 60. This can come in handy if you’re trying to sell and buy a house at the same time.