How to Buy a House While Selling Your Own
In a perfect world purchasing a house while selling your old one is the best path to take for many home sellers turned home buyers which would take place in one day. You'd simply sell your old one, then go on to closing on the new one. However, in the real world, it's not that simple, and you'll need to expect some time between selling your house and buying your new one or vice versa. This is sometimes due to delays that are out of our control. Your agent will do their best in minimizing these delays.
The process is quite complex with steps and a rhythm that is hard to get just right. If you're wondering how to buy a house while also selling your current house, extensive knowledge of the process is important, and empowering yourself with the information you need can save you a great deal of time, money and stress. With the right agent you can have a smooth and successful transaction and enjoy moving into your new home.
The real estate market will usually dictate whether you need to sell first or can buy first. In a sellers market, you will more than likely need to sell your home first or at least be in contract with a buyer because the seller of the home you want to buy from doesn’t want a buyer that is contingent on selling their home. They would rather have a buyer that is non-contingent and ready to go. This is usually the case for most sellers but if you have the financial means to be able to afford to buy another home without selling their existing home then go ahead and make an offer on a home without contingencies. In a buyers market, the seller is more open to accepting an offer that is contingent on selling their home so you have more time in placing your home in the market. If you don’t know what kind of market it is, just ask your real estate agent. Here are now the pros and cons of each scenario.
Pros and Cons of Selling Before Buying
Pros - The Benefits of Selling Before Buying:
- You won't have to risk paying for two mortgages at the same time
- Cash will be easily accessible for a down payment for your new property
- You will have a better idea of the equity that can be put into your new home.
- You may not qualify to carry two mortgages, so this option can be ideal for those with less-than-stellar credit
- You won't have the pressure to reduce your asking price to sell your home quickly
- You will be able to let go of one home before taking on the responsibility of a new home, which can make things feel properly ordered
Cons - The Negative Aspects of Selling Before Buying:
- Finding a temporary place to live before settling in a new home can be troublesome
- You will probably have to deal with moving two separate times which can be exhausting
- You may feel pressure to find a new home in a hurry
- Paying for storage and additional moving costs for two moves can add up
- Your investment will temporarily be out of the real estate market
Pros and Cons of Buying Before Selling
Pros - The Benefits of Buying Before Selling
- The process of house hunting can be more relaxed and enjoyable
- You only move one time, so you won't face expensive storage fees or doubled moving expenses
- You are less likely to have regrets from rushing into buying a house in a hurry
- You'll have a place to go right away before you even let go of your current house
- You have a cushion in case something goes wrong during the process of purchasing the new home. That way, if the deal falls through, you can continue living in your old home
Cons - The Negative Aspects of Buying Before Selling
- If your cash is tied up in the investment in your current home, you may not have as much freedom to make a larger down payment or high offer for the new home
- You might be pressured to accept a lower offer on your house if you are then in a rush to sell
- You may end up paying for two residences at once until you sell your home
- You will also be responsible for two sets of taxes
- If you decide to rent out your current home until it sells, you may face many challenges that come with being a landlord. They may be more complex given the fact that you are trying to show and sell the home with a tenant
- You may not qualify for a new mortgage when you have your existing one
The Steps of Selling First
When you are trying to navigate how to buy a house contingent on selling yours, you may decide that selling first makes the most sense for your special circumstances. If so, take these steps to sell first:
- To sell your house before buying a new one, first contact a real estate agent about listing your home for sale. Then, once you have a concrete offer from a hopeful buyer, it's okay to start looking for your new home. That can help the process go smoothly and not leave too much time between the selling and buying.
- Decide on where you'll live before you find a new home. Life happens, and some sellers find that they can't find the right home for weeks or months. It sometimes takes even longer than they anticipated. Be sure that you will have a steady, secure place to live from the moment you sell your home until you are moving into your new one.
Fulfill all your obligations as a seller, once you know that you will have a secure place to stay until you find your dream home.
The Steps of Buying First
Sometimes buying first is just the best way to go. If you want to know how to buy a house before selling your current house, follow these steps:
- Start house hunting right away. Be proactive since you do still want to get the ball moving on selling, yet it's important to find just the right home for you.
- Make an offer on your dream home and request an extended closing. In this situation, you can request an extended closing if you feel that you are close to selling your home. That will give you time to better coordinate the sell of your old home while you purchase the new one. Please note that this only applies to a situation when you are close to selling your old home while buying the new one. If you decide not to list the home for sale until you have a new one, the next step would be to contact the real estate agent to list your home for sale.
- If you have savings, you may use that to purchase your next home. Alternately consider purchasing the house with a home equity line of credit. That can allow you to borrow against the equity in your current house until it sells. That way, your available cash isn't tied up in the old home.
- Close on the new home.
- Consider renting your old home until it sells. That can prevent you from paying excessive costs.
Conclusion and Further Reading
The complex processes of both buying a new home and selling your old home can have a major impact on your financial health for many years to come. Weigh the pros and cons, then assess your circumstances. If you struggle with making this decision on your own, speak to your attorney, financial adviser, or iSanDiegoRealEstate agent to decide how to best proceed.