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December 7, 2023

How to Sell and Buy a House at the Same Time


Tim Clarke

How to Sell and Buy a House at the Same Time

How to Sell and Buy a House at the Same Time

If you're considering buying and selling a home simultaneously, you're about to embark on a complex, yet exciting journey.

It's understandable to be overwhelmed by the thought of tackling such an endeavor, but with the right strategy and guidance, this transition can be a smooth one.

You should know that selling your home is not solely a financial decision, but a lifestyle one as well.

One of the primary concerns you may have is, "What happens if I sell my house without a new home to move into?"

To avoid this situation, it's crucial to understand your options as both a buyer and seller to ensure a hassle-free transition.

Owning real estate can provide new investment opportunities allowing you to leverage your finances in unprecedented ways.

As a matter of fact, did you know that tapping into a home's equity can enable you to purchase additional properties or a vacation home, allowing you to build wealth?

Further, leveraging the equity already built in your current home, you may be able to upgrade your home to a more suitable one for your lifestyle.

Over the last handful of years, homeowners across the USA have experienced significant growth in their home equity.

By understanding how to capitalize on your home equity, it's entirely possible to upgrade to a better home, build wealth, or own a vacation home, among other benefits.

In today's fast-paced seller's market, many homeowners know that they can get top dollar for their home but most are skeptical because they don’t want to end up homeless.

Therefore, we are pleased to offer our professional services to ensure that your transition to your new home is as smooth and hassle-free as possible.

In this article, we guide you through the intricate process of buying and selling a property simultaneously.

We provide you with the tools to make informed decisions during the entire process, including specific considerations like timelines, financing, and strategic offers and counteroffers.

Understand the Current Housing Market Climate

As the founder of one of Raleigh-Durham's top real estate teams, I always emphasize to my clients that properly timing the purchase and sale of a home depends greatly on our local housing market.

Whether your move is across town or across the country, understanding if we’re in a buyers' or sellers' market is key.

My team factors market conditions into every client's timeline, especially if they’re selling here and buying elsewhere.

I've found the time it takes to buy and sell varies widely based on supply and demand dynamics in our area.

With over a decade of experience here, my team leverages our deep expertise in the Raleigh-Durham market to help clients make informed decisions for their move.

Be Careful when Using Computer Generated Data Like the Zestimate

As an experienced real estate professional in this market, I always tell my clients that while third-party websites provide general home value insights, their computer-generated estimates simply cannot match the accuracy of an in-person appraisal and analysis from a local expert you know and trust.

I've seen those sites under and overprice properties far too often, sometimes missing recent comparable sales or neighborhood factors that impact value.

There's no substitute for an agent with boots-on-the-ground expertise when it comes to understanding the true condition and earning potential of your home.

My advice is to always connect with a reputable professional for a pricing consultation tailored to your property.

I'm happy to provide that service and outlook based on the latest data and sales to give you the most precise valuation before you make any decisions.

What is a sellers market?

In a sellers market, there is more demand from buyers than supply of homes on the market. In a sellers market, your current home will probably sell with multiple offers and more quickly than you can find a new home.

Consider asking buyers to do a rent-back after closing to give you more time to find your next place.

What is a buyers market?

In a buyers market, there is more supply of homes available than demand from buyers. In a buyers market, you will likely find it easier to find a new home to purchase than to sell your existing home.

Sellers may be willing to accept a contingent offer, where you agree to buy their home contingent on selling yours first.

Properly preparing the home for the market and competitively positioning your home in the marketplace are key elements to  getting your home sold

Evaluate Your Financial Situation

Before diving into the process of buying and selling a home concurrently, it's essential to assess your financial situation.

Depending on your financial ability and the flexibility of the lender, you may not have to sell your home first in order to purchase.

Lenders understand the nature of a competitive sellers market and they also consider your strengths and weaknesses.

Consult with your lender to determine your current home equity, credit score, and debt-to-income ratio, as these factors will play a crucial role in securing financing for your new home.

A savvy loan officer will help you create a tailored plan so you can avoid your offer lacking a competitive edge.

What is Home Equity?

As a homeowner, you may have heard the term "home equity" thrown around in conversations related to property investments.

But what is home equity, exactly? In simple terms, it's the difference between your home's current market value and the outstanding balance on your mortgage.

Home equity has two main growth factors: on-time mortgage payments and appreciation of your home's value.

But, it's not just about growing your equity. Getting the right mortgage and managing your payments are just as essential as making the initial purchase.

How Can I Use the Equity in My Home?

The first step in leveraging your home equity is to determine how much you have available.

When it comes to homeownership, building and leveraging equity in a property is a critical aspect of the investment.

Once built, home equity can be used for a variety of purposes. Here are some common ways homeowners in Raleigh, NC, can use home equity to their benefit:

  1. Home Improvement: Home equity can be used to finance renovation projects that can increase your property value in the long run, such as adding an extra bedroom, upgrading your kitchen, and installing new flooring.
  2. Debt Consolidation: If you have multiple high-interest loans or credit card balances, you may be able to consolidate them with a home equity loan or line of credit, which could offer tax benefits and lower interest rates.
  3. Property Investments: Using the equity you've built up in your primary residence is a fantastic way to purchase additional property or investment property. This could help you build wealth and generate additional income streams.
  4. Retirement: A reverse mortgage allows homeowners aged 62 and older to use their home equity to generate income in retirement. The loan payments are paid out to the homeowner and are not repayable until the borrower passes away, moves out of the property, or sells it.
  5. Emergency Funds: Home equity can also be used as an emergency fund to cover unexpected expenses, such as medical bills or emergency home repairs.

You can estimate your home's value by researching recent sales in your neighborhood or consulting with a member of the Tim M. Clarke team to assist you.

Remember that lending institutions typically require you to retain a certain percentage of equity in your home, so factor this into your calculations.

Whatever your motivation is for selling your home, you'll need to create a solid plan for how you're going to buy a new house.

Instead of using your savings for another down payment, you can leverage the existing equity in your home to fund the purchase of your next home.

There are a few options you have to use your existing equity when selling your home:

Use Your Equity for the Down Payment of Your Next Real Estate Purchase

As you go through the process of selecting a lender, there are a few things you would need to consider.

There are several financing options available for leveraging home equity to purchase another property:

  • Home Equity Loan
  • Bridge Loan
  • Home Equity Line of Credit (HELOC)
  • Cash-Out Refinance

Home Equity Loan

A home equity loan is a lump-sum loan that uses your home's equity as collateral.

This type of loan generally has a fixed interest rate and repayment term, making it a suitable option for those who prefer predictable monthly payments.

As collateral, some lenders may allow you to use the equity in your current home to purchase your new home and possibly a secondary investment property.

A great advantage is that your current mortgage service provider may give you the same rate as your current mortgage.

Bridge Loan

Bridge loans can offer homeowners flexibility, providing the financing they need to buy their new home, even when it's challenging to sell the old one.

However, Keep in mind that bridge loans are generally more expensive than primary mortgages, and careful consideration is required when deciding on this loan option.

A bridge loan is typically used when there's a gap between the sale value of a current home and the purchase price of a new one.

Here's how bridge loans work:

  1. Identify Your New Home: Start by finding your new home that you're interested in buying. Note that a bridge loan is an option typically used in competitive markets, so you can get the edge over other buyers.
  2. Get Approved for a Bridge Loan: Apply for a bridge loan with a lender or a mortgage broker. The lender will review your credit score, income, and other financial considerations to determine your eligibility and approve the loan amount.
  3. Use the Bridge Loan for a Down Payment: Once approved, the bridge loan's lump sum can be used as the down payment for your new home purchase.
  4. Sell Your Current Home: After you've moved into your new home, it's essential to sell your old home as quickly as possible. The proceeds from the sale can be used to repay the bridge loan.
  5. Repay the Bridge Loan: During the period you have a bridge loan, interest accrues, and you may be responsible for making the monthly interest payments. After the sale of your old home, the loan will be due in full and the bridge loan's interest and applicable fees.

Home Equity Line of Credit (HELOC)

A HELOC is a revolving line of credit that allows you to borrow against your home equity as needed, up to a specified limit.

HELOCs typically have variable interest rates and offer flexibility in terms of repayment, making them a popular choice for those with changing financial needs.

For example, if your HELOC is for $50,000, you can choose to only use $30,000 of it. The biggest benefit for this is that you only pay interest on the amount used, not the full amount.

Cash-Out Refinance

A cash-out refinance involves replacing your existing mortgage with a new, larger loan, allowing you to access a portion of your home's equity as cash.

This option may be attractive if you can secure a lower interest rate on the new mortgage or if you want to consolidate other debts into a single payment.

This option allows you to pull equity out to use towards the purchase of your new home.

This most commonly works if you’ve already refinanced before selling your house. You should be able to use as much as 85% in equity of the home's appraised value.

Write a Contingency Offer

When you find the perfect new home, be prepared to make a competitive offer.

We will work with you to help you understand the local market and develop a strong offer that will appeal to the seller.

A contingency offer is the most straightforward and simplest way to buy and sell at the same time but it isn’t ideal if you will need to compete with other buyers that may not need to sell their home to purchase.

A contingency is a stipulation in a residential real estate purchase agreement that states that the buyer has to sell their house to complete the purchase.

Contingencies are very common in residential real estate purchases since the bulk of a buyer’s funds for purchasing is typically in the equity of their current home.

The very essence of the American Dream isn’t necessarily the home itself but the equity that accrued during homeownership.

Contingency offers aren’t the most ideal to a seller unless the buyer’s home is likely to sell.

Good listing agents would research the home involved in the contingency to determine if that buyer’s offer is in the seller’s best interest.

If your home isn’t actively listed, it will diminish your contingency offer. Also, it would be ideal not to make any offers until your house is under contract.

It is a best practice to include contingencies to protect you in the event that the sale of your current home falls through.

Make Sure Your Home is Market Ready

To maximize your home's appeal and sale price, invest time and effort into preparing it for the market.

Clean, declutter, and stage your home to make it more attractive to potential buyers. Consider your landscaping, interior paint, and carpet if necessary.

Luckily, if you’ve bought a house before, you may have more of an idea of what you want in a home and the process.

The one thing that you must consider is that the competing buyers in your market may be paying cash and may not have to sell their home to complete the purchase.

Prepare your home for the market first. If done correctly, you will attract the right buyers and hopefully, multiple buyers.

Get a pre-market inspection and complete all repairs within your budget. Address any necessary repairs and consider making strategic updates that will increase your home's value.

Be Realistic About the Price of Your Home and Leverage Multiple Offers

Rule of thumb, if you list your home in a hot seller’s market and you haven't received more than one offer, then your home is overpriced.

If you are unrealistic about the sale of your home, it can derail sensitive timing and kill your ultimate goal of making the purchase of your new home.

If you’ve successfully priced your home competitively and achieved multiple offers, you can let the competing buyers know that you will either need a late closing date or you will need to lease back the house after closing.

This will give you the time you need to secure your next home and possibly remove the contingency on the purchase of your next home.

Coordinate the Closing Process

Successfully closing on both your sale and purchase transactions requires careful coordination.

While it might be challenging to align the sale and purchase of two properties perfectly, it's crucial to establish an optimal timeline.

The real estate agent, lender, and title company will ensure that all necessary documentation is in order, inspections are completed, and any issues are resolved.

Keep in close communication with all parties to minimize delays and ensure a smooth closing process.

Plan for the Unexpected

Despite your best efforts, sometimes unforeseen challenges can arise. Be prepared to adapt and adjust your plans as needed.

For example, you may need to arrange for temporary housing if the sale of your current home occurs before the purchase of your new one.

Maintaining a flexible mindset will help you navigate any obstacles that come your way.

Summary. Which Option is the best?

Many homebuyers choose to sell their current house first before buying a new one.

This approach provides them with the necessary funds to finance their next home purchase and reduces financial stress.

By avoiding the burden of managing two mortgage payments and dealing with additional closing costs, buyers can create a more straightforward and manageable budget.

However, this approach also comes with its downsides. One significant disadvantage is the potential for homelessness.

Between selling their existing home and finding a new one, buyers may find themselves without a permanent place to live.

This is especially challenging for families with pets and belongings, making the situation more inconvenient.

Additionally, this approach involves moving twice; first to temporary housing, and then again to the purchased home.

This can create additional stress and may incur more costs. Finally, the pressure to buy a new home quickly can lead to making hasty decisions that may not be ideal for the buyer in the long run.

Buying a new home before selling your old one also has its benefits, but it requires careful consideration and preparation.

One significant advantage is the flexibility it offers. You can take your time moving and avoid living in limbo while waiting for your old house to sell.

If you're on a tight schedule, buying first can be beneficial, ensuring you have a place to move into before your set deadline.

However, buying first requires significant financial resources.

You'll have to deal with your existing mortgage payments or selling costs, as well as the down payment, moving fees, and upkeep for both properties.

This could be challenging if you're on a tight budget or limited income.

Furthermore, buying first may make getting a new mortgage more difficult.

Your debt-to-income ratio will be higher since you still have existing mortgage debt, and this could lead to limited loan options, higher interest rates or even disqualification from a loan.

Selling Before Buying

Selling your old house first can be a viable option, but it requires careful consideration and planning to ensure a smooth process.

To start, you'll want to arrange temporary housing before you list your current home. This can involve staying with friends or family, renting a hotel room or apartment, or finding other suitable housing that fits your needs.

To minimize the time spent in temporary housing, it's essential to know what you're looking for in a new house before selling your old one.

Start researching neighborhoods, narrowing down your list of must-haves, and get preapproved for a mortgage loan.

When you finally accept an offer on your current home, it's time to be ready to move quickly.

Having a mortgage lender in mind, setting a budget, and knowing your timeline will enable you to make offers on relevant properties right away.

Finally, you can consider negotiating a lease-back agreement with the buyer of your old home if they're not in a hurry to move in.

This arrangement would allow you to rent the property for a certain period while you find a new home. You may have to make financial adjustments or offer other concessions to the buyer as part of the lease-back agreement.

Benefits of Selling Your Current Home Prior to Purchasing

  • You'll know precisely the equity amount you have to put toward the new property.
  • Rolling over the equity from your present home into the next purchase is straightforward.
  • Completing one phase first by closing out your current chapter can prove less stressful before shifting focus to your next relocation.

Drawbacks of Selling Your Present Home Before Buying Another

  • You will probably need to arrange temporary accommodations.
  • Expenses can accumulate from storage fees and two separate moving processes.

Buying Before Selling

If you've decided to purchase your new home first, there are specific strategies you can use to simplify the process and minimize financial risks.

Firstly, you can rent out your old property or list it on short-term rental platforms such as Airbnb, VRBO, or others. By doing so, you can generate income to cover mortgage payments and expenses while you search for a long-term buyer.

Secondly, you could consider a contingency clause when submitting an offer on your new home.

This contingency states that your offer is subject to the sale of your current home within a specified timeframe.

If you can't sell your house within that period, you have the option to back out of the deal with no penalties. Some sellers may not agree to this clause, but in a slow market, you might have the chance to negotiate.

Finally, if you have equity in your current home, you could use this to free up cash to finance your new purchase.

A home equity loan or bridge loan could help cover your down payment, closing costs, and other expenses while you maintain both properties.

Keep in mind that these options may have high-interest rates; so, it’s crucial to consult with a financial advisor before choosing any of these methods.

Benefits of Purchasing a Home Before Selling Your Current One

  • You'll have a new residence ready for you to move into right away, avoiding storage fees and temporary housing costs.
  • You only need to relocate one time, saving you money compared to multiple moves.
  • Without the pressure of being on a tight deadline, you can take the necessary time to find a home you truly love rather than having to rush into a decision. You always have the option to remain in your current house a bit longer during your search.

Drawbacks of Purchasing a New Home Before Selling the Current One

  • You may feel pressured to sell quickly, potentially accepting a lower offer than you normally would.
  • Contingent offers tend to be less competitive, especially in fast-moving housing markets.
  • With your capital tied up in your present home, you may lack the cash to make an appealing offer on a new property.
  • Becoming a landlord by renting out your current house can come with challenges, and selling a tenanted property later on can prove difficult.

Final Thought

Buying and selling a home at the same time can be a rewarding experience when approached with careful planning, expert guidance, and a flexible attitude.

By following these steps and enlisting the help of an experienced real estate agent, you can successfully navigate the process and embark on the next exciting chapter of your life in your new home.

These are just a couple possible ways to sell your home an buy another at the same time in a hot seller’s market.

As a buyer, it is best to know what will make your offer stand out against competing offers and as a seller, it is best to understand how to leverage competing offers.

If you hire one of our skilled agents, we can put together a solid logistical game plan to sell a your house to buy another.

It is possible to buy and sell a house without a Realtor but there are too many moving parts that would make it an impractical and possibly costly idea.

Logistically, there are too many moving parts and Realtors have resources to facilitate a sequential residential real estate purchase transactions that the general public simply doesn't.

My team has a reputation of achieving such goal without any extra storage fees or unnecessary moving expenses.

We will help you create a situation in which your are moving furniture from your old house straight to your new house. Consult one of our agents to discuss how we can get job done.

Frequently Asked Questions

What is the biggest challenge with buying and selling at the same time?

The biggest challenge is timing everything perfectly so you don't end up owning two homes or being homeless. Proper planning and coordination is key.

How soon should I list my home when trying to buy and sell simultaneously?

You should list your home before you start looking at new homes. This reduces the risk of finding a new home you love before selling your current one.

Should I sell my house first or buy a new house first?

It's best to have an offer on your current home before finalizing the purchase of a new home. This prevents owning two mortgages.

What is a contingent offer?

A contingent offer means the buyer's purchase is contingent on selling their existing home. It makes the deal binding only after the buyer sells their other property.

Should I use one real estate agent or two different ones?

Use one agent to represent you in both transactions. This makes coordinating the timing and paperwork much simpler.

What happens if there is a delay in selling my home?

Build in buffer days between the two home closings in case there are delays. Also, request flexibility on move dates from buyers and sellers.

How can I be competitive as a buyer when I still need to sell my house?

Getting pre-approved for a mortgage shows sellers you are qualified and ready to buy. Submitting a contingent offer also makes your offer more attractive.

Should I rent a storage unit during the transition?

Yes, renting a storage unit allows you to move belongings out of the home you are selling so it appears tidy for showings.

Can I make non-contingent offers while waiting for my home to sell?

This is risky since you could end up owning two homes at the same time. Stick to contingent offers.

What paperwork do I need to buy and sell concurrently?

You'll need a pre-approval letter, purchase agreements, listing agreements, disclosures, inspection reports, appraisals, and more for both transactions.

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