With over 35 million Americans buying homes every year, buying and selling at the same time is a situation most homeowners find themselves in eventually. There are many different varieties of strategies for buying and selling at once, but not all of them are realistic in light of today’s competitive housing market and high prices. If you’re preparing to buy and sell a house at the same time, then here’s what you need to know.
Buying First vs. Selling First
Most people can’t afford two mortgages, which rules out buying a home before selling. However, selling before buying comes with challenges. To avoid being house-less between selling and buying, buyers must negotiate contingencies or make alternative living arrangements.
Seller Contingencies
Sale and settlement contingencies make the purchase of a new home contingent on a successful home sale. While sellers can seek other offers, sale and settlement contingencies give you the right of first refusal. However, since sale and settlement contingencies are risky for sellers, they work best in buyer’s markets where sellers are unlikely to receive better offers. Sale and settlement contingencies are rarely accepted in competitive housing markets.
Alternatively, you can request an extended closing if you’re confident your home will sell quickly. However, like sale and settlement contingencies, extended closings push risk onto the seller. As such, they may not be accepted in a seller’s market.
Alternatives to a Contingent Offer
If you find and close on the perfect house between the time you make an offer on a new home and closing day, you may be able to avoid a second move. However, few home buyers are so lucky, especially when local housing stock is limited.
As a back-up plan, sellers should make temporary living arrangements or sign a rent-back with the buyers of their old home. A rent-back provision is an agreement to continue living in your home until you’ve purchased a new one while paying rent to your buyers. Rent-back agreements are a popular choice, with nearly 20 percent of sellers utilizing this strategy.
If you do need to move twice, make it easy on yourself by only packing once. If you store your stuff in a storage pod, you can pack at your own pace, then hire a transport company to move the container first to your rental and later to the new home. If you find a furnished rental, you won’t need to unpack anything but the essentials.
Preparing for a Speedy Move
The transition between selling and buying is easier when you head into your move prepared. Before listing your home, determine your home’s resale value and your equity. Unless you have cash reserves for a down payment, you’ll need this equity to purchase your next home.
Once you know how much you can put down, talk to your lender to get pre-approved for a mortgage. Most likely, you’ll use a conventional mortgage to buy your next home. Conventional mortgages offer lower interest rates than other mortgage types, and buyers who put 20 percent down aren’t required to pay mortgage insurance. While conventional loans offer both adjustable- and fixed-rate mortgages, most buyers opt for fixed-rate loans.
Should You Use the Same Agent?
The final question when buying and selling a home is whether to hire one agent for both transactions or use separate buyer’s and listing agents. Working with a single agent has its benefits, particularly when it comes to cost savings. Keep in mind, however, that not all real estate agents represent both buyers and sellers. Even if your agent is comfortable on both sides of the transaction, she may not be familiar with both neighborhoods. If your agent isn’t up to the task of representing you as a buyer and a seller, ask for recommendations for a second agent.
Whether you hire one real estate agent or two, make sure your agent understands the complexities of buying and selling a home at the same time. Navigating two real estate transactions at once can be stressful, but with a great agent, you can develop the best strategy for selling your old home and getting into a new one without a hitch.
Image via Unsplash
Buying First vs. Selling First
Most people can’t afford two mortgages, which rules out buying a home before selling. However, selling before buying comes with challenges. To avoid being house-less between selling and buying, buyers must negotiate contingencies or make alternative living arrangements.
Seller Contingencies
Sale and settlement contingencies make the purchase of a new home contingent on a successful home sale. While sellers can seek other offers, sale and settlement contingencies give you the right of first refusal. However, since sale and settlement contingencies are risky for sellers, they work best in buyer’s markets where sellers are unlikely to receive better offers. Sale and settlement contingencies are rarely accepted in competitive housing markets.
Alternatively, you can request an extended closing if you’re confident your home will sell quickly. However, like sale and settlement contingencies, extended closings push risk onto the seller. As such, they may not be accepted in a seller’s market.
Alternatives to a Contingent Offer
If you find and close on the perfect house between the time you make an offer on a new home and closing day, you may be able to avoid a second move. However, few home buyers are so lucky, especially when local housing stock is limited.
As a back-up plan, sellers should make temporary living arrangements or sign a rent-back with the buyers of their old home. A rent-back provision is an agreement to continue living in your home until you’ve purchased a new one while paying rent to your buyers. Rent-back agreements are a popular choice, with nearly 20 percent of sellers utilizing this strategy.
If you do need to move twice, make it easy on yourself by only packing once. If you store your stuff in a storage pod, you can pack at your own pace, then hire a transport company to move the container first to your rental and later to the new home. If you find a furnished rental, you won’t need to unpack anything but the essentials.
Preparing for a Speedy Move
The transition between selling and buying is easier when you head into your move prepared. Before listing your home, determine your home’s resale value and your equity. Unless you have cash reserves for a down payment, you’ll need this equity to purchase your next home.
Once you know how much you can put down, talk to your lender to get pre-approved for a mortgage. Most likely, you’ll use a conventional mortgage to buy your next home. Conventional mortgages offer lower interest rates than other mortgage types, and buyers who put 20 percent down aren’t required to pay mortgage insurance. While conventional loans offer both adjustable- and fixed-rate mortgages, most buyers opt for fixed-rate loans.
Should You Use the Same Agent?
The final question when buying and selling a home is whether to hire one agent for both transactions or use separate buyer’s and listing agents. Working with a single agent has its benefits, particularly when it comes to cost savings. Keep in mind, however, that not all real estate agents represent both buyers and sellers. Even if your agent is comfortable on both sides of the transaction, she may not be familiar with both neighborhoods. If your agent isn’t up to the task of representing you as a buyer and a seller, ask for recommendations for a second agent.
Whether you hire one real estate agent or two, make sure your agent understands the complexities of buying and selling a home at the same time. Navigating two real estate transactions at once can be stressful, but with a great agent, you can develop the best strategy for selling your old home and getting into a new one without a hitch.
Image via Unsplash
