How to Buy a Home Before You Sell Yours

In the real estate fantasy world, every homeowner sells their home and buys a new one at around the same date, and the closing dates line up perfectly. In the actual real estate world, this rarely happens, and homeowners need to decide whether they want to buy a new home before they sell their existing one.

How does this work in practice? What are the pros and cons of this strategy? If you’re wondering how to buy a home before selling yours, we discuss all the details below, including the circumstances that are best for this strategy, the special financing you can get for it, and how an experienced real estate agent can help you with the process.

The Pros and Cons of Buying Before Selling a Home

Buying before selling a home has upsides and downsides. Here’s what you should prepare for:

Pros of Buying Before Selling Your Home

• If your closing dates overlap, you will have more time to actually move. If you’ve ever moved out of one place and into another on the same day, you know how challenging that can be. To make it worse, an end-of-month closing often forces you to compete for moving trucks and movers.
• When your new house is sitting empty, you can do renovations, paint, and give it a good cleaning.
• You might be able to wait for shifts in the market to get a higher price for your home.

Cons of Buying Before Selling

If you have a mortgage on your current home, you risk carrying two mortgages. This could get expensive if your current home doesn’t sell quickly enough. You’ll also be paying for insurance and property taxes on both homes during the overlap.

You might need bridge financing to cover the down payment on your new home. The interest will be an additional expense.

If the time to sell your home drags, you may feel pressured to lower the selling price.

How to Buy a Home Before Selling

Hire an Experienced Real Estate Agent

Working with a great real estate agent can help you maximize the pros and minimize the cons of buying a home before selling. A good agent will help you coordinate the timelines involved, advise you about what offer to make and which one to accept, and ensure that the contingencies in your purchase offer are optimal.

Put Contingencies in Your Offer

Having the right contingencies in your purchase offer is “how to buy a home before selling yours” 101. Make sure your offer is contingent on the sale of your current home, and try to get a flexible closing date if possible.

Arrange Your Financing

Talk to your lender early so you have a mortgage application underway.

You may need a bridge loan to tide you over after you make the down payment on your new home and before you receive the payout from your existing one. Ask your lender about options and start an application for bridge financing as soon as possible.

You may also qualify for a home-equity line of credit, but not all lenders offer these. These financing options can be expensive, so leave plenty of time to shop around so you don’t wind up overpaying for credit.

Make a Backup Plan

If you’re buying before selling your home, you could be left with an empty home on one end or the other. Consider renting one of them out in the interim. This strategy will give you more flexibility to wait for market conditions to change, but of course, it will require more hands-on work on your part, and it comes with its own risks.

Preparing for Closing Day

Optimally, your closings will both happen on the same day. This is not unusual, but having an experienced real estate agent is key; they will ensure that everything goes to plan, that you’re not expected to be in two places at the same time, and that nothing gets missed.

Plan to start your day early, as you’ll have a very busy day! Stay hydrated and nourished; take it from us: it matters!

If you wind up buying before selling, your bridge loan will kick in to make up the gap between your new mortgage and the purchase price of your new home. Once your existing house sells, pay off the bridge loan or line of credit. Your lender should handle this for you, but check a few days before to make sure everything is on schedule.

The Role of the Market

The wisdom of buying before selling a home can depend on the state of the market. In a fast-moving seller’s market, where homes are flying off the shelves, it might be easier to buy first because you know you’ll be able to sell your home quickly and for a favorable price. In a slower or balanced market, you risk having your home sit unsold for longer periods, which means you could end up with two mortgages and feel financially pressured to sell at a less-than-optimal price.

Before you decide to buy before selling, talk to your real estate agent about market trends in both your current neighborhood and your hoped-for area. They can help you with your timing and advise you about how realistic your plan is.

Having a skilled real estate agent in your corner is a good idea, no matter what transaction you’re thinking about. Still, it’s particularly important when trying to figure out how to buy a home before selling yours.

The experienced agents at REMAX have guided many homeowners through this situation successfully. We are here to give you market insights, timing assistance, and access to our collective expertise! Contact a REMAX agent today for information and guidance!