The housing and real estate market has been a little crazy over the last few years. In some areas, homes go on the market and have an accepted offer within 24 hours. Other houses languish for sale with no offers for months at a time.
If you’re looking to sell your house and buy a new one, determining how you should time putting your house on the market while making an offer on the new home of your dreams can be very stressful.
This guide on how to buy and sell a house at the same time will make your task a little easier. Keep reading to learn more about your options for buying and selling homes.
Advantages and Disadvantages of Selling Before Buying
First, let’s discuss what can happen if you choose the path of selling your existing home before you leap into purchasing another. There are advantages and disadvantages to approaching it this way, depending on your financial and personal situation.
Pros of Selling Your Home First
Selling your home or investment property before you buy a different one might be the best option in certain situations. Some of the reasons you may want to consider selling before buying include:1
- Less financial stress – The biggest plus of selling your home before you buy a new one is that you’ll have less financial stress. For one, you won’t have to worry about paying the mortgage for two separate properties. You’ll also have the proceeds from your home sale to put toward the home you want to buy.
- More competitive cash offer – Having the proceeds from the home you sell is also important for the offer you make on a new home. When the housing and real estate market is booming and homes are selling quickly, you want to do everything you can to get multiple offers and ensure that they are competitive. Having more cash on hand is a key component of a competitive offer.
- Can take your time on the new home purchase – A new home is likely the most important and expensive purchase you’ll make. You don’t want to feel rushed into the decision. When you sell your home first, you don’t have to feel pressured to find a new home to buy before closing. Instead, you can take your time and make sure the new place you buy is perfect for you and your family.
Cons of Selling Your Home First
The most obvious disadvantage that comes with selling a home before buying a new one is that you will need somewhere to live in the time between. If you have family nearby who are willing to open their home to you for as long as it takes, you might be able to stay with them.
If you don’t have family nearby, you might have to find a short-term rental to stay in until you buy your new home. Paying rent will cut into your available cash for your new home purchase. You might also have to come up with the money (and endurance) to move your possessions twice—both to the rental and to the new house.
Advantages and Disadvantages of Buying Before Selling
While there can be some significant financial benefits to selling your existing home before buying a new one, it doesn’t work for everyone. Alternatively, some people choose to buy a home before selling their existing home. As you might expect, this method also comes with pros and cons.
Pros of Buying a New Home First
If it’s financially feasible to buy a new home before you sell your existing house, some of the advantages you might experience include:2
- Fewer moving expenses – No one really likes moving. It’s stressful, difficult, and expensive. When you buy a new home before you sell your existing house, you only have to worry about moving once. This saves you the hassle and expense of moving twice in a short period.
- More time to consider your buying options – When you buy a new home before listing your current home, you control the timeline. You can look for a new house without any pressure to find one before you need to be out of your existing home. This might help you make a better decision as we all make poor choices when we’re rushed or stressed.
- You don’t have to find a place to stay when you sell your home – Buying a new home first means you have somewhere to go right away when you sell your existing home. Furthermore, you can also move into the new home right away. This makes keeping your old home clean for showings a breeze since you won’t have to clean up after your family before people come to see your house.
Cons of Buying a New Home First
There are also some pretty significant disadvantages to buying a new home before selling your existing place. The biggest problem for many people is financial. If you have a mortgage payment on your current house and don’t have access to cash, you won’t be able to come up with a decent down payment on the new home. This can weaken your offer. Learn about selling a house with a mortgage or look into a bridge loan solution as a short-term option to cover your down payment until you sell your old house or investment property.
You may also end up paying two mortgages, utilities, and sets of property taxes until you’re able to sell your existing home. This can present a significant financial burden for many families.
How to Buy and Sell A Home at the Same Time
If you don’t want to or cannot buy a new home or sell your existing home first, you might opt to do both at the same time. It’s certainly possible to do so. In fact, according to the National Association of Realtors, it’s fairly common for people to buy and sell a home at the same time.3 Some things to keep in mind when you buy and sell a home simultaneously include:
- Consider the housing market – You may be wondering, “Should I sell my house now or wait?” First, you should make sure you know what the housing market is like in your area. Are homes flying off the market? If so, is your current house comparable to other houses that are selling quickly? Will you be able to make a competitive offer on a new home while you’re in the process of selling your existing home? Do your market research to see if we’re in a seller’s market or a buyer’s market before deciding to sell or buy.
- Get a financial check-up – To better understand how competitive your offers on a new home might be, you’ll need to have the full picture of where your finances sit. Do you have access to cash to make an offer on a new home before you sell the old home? What is your credit score? Can you qualify for good financing on the purchase of a new home? Knowing this information before you begin the process will help you make informed financial decisions.
- Learn about contingencies and offers – Once you have a clear financial picture, you’ll know how much you can afford to offer for a new home. You might need to include a contingency that dictates that you need to sell your existing home for the offer you make on a new home to be valid. This contingent offer protects you from being liable for the home purchase if you cannot sell your existing home in time.
- Have a backup plan – Home sales might fall through for many reasons. You should make sure that you have a backup plan both for the sale of your existing home and the purchase of a new home, just in case. For example, if you can sell your home but the purchase of a new home falls through, do you have a place to stay while you look for a new home?
- Understand all of your options – Buying and selling a home simultaneously can be difficult, stressful, and even frightening. You don’t want to end up without a place to stay. Nor do you want to be rushed into making a decision that might not be in your family’s best interest. Luckily, there are alternative options, such as a sale-leaseback program, that you can consider. Don’t hesitate to think outside of the box to meet your family’s needs when buying and selling a home.
Both selling a home before you buy a new one and buying a house before selling your current residence have advantages. Selling first gives you a little more financial freedom, while buying first removes some of the pressure of shopping for a new home. Some people prefer to jump all in and do both selling their current home and buying a new home at the same time. This can be done; it just requires a little more creativity, luck, and patience.
- Zillow. Buying and Selling a House at the Same Time. https://www.zillow.com/home-buying-guide/buying-selling-at-the-same-time/
- Redfin. How to Buy and Sell at the Same Time. https://www.redfin.com/guides/faq/how-to-buy-and-sell-at-the-same-time
- National Association of Realtors. 2019 Profile of Home Buyers and Sellers. https://www.nysar.com/wp-content/uploads/2020/01/2019-NAR-HBS.pdf