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Buying before selling
The first approach to buying while selling is simply purchasing a new house before letting go of your old home.
According to Utah real estate agent Susan Boyer, the most significant advantage here is that it relieves some moving stress. Instead of finding temporary housing or paying for a short-term rental, you can stay in your current home and move at your own pace.
“At that point, you can move in [to your new home], and it allows your agent to market your current home that you were living in more effectively,” says Boyer, who touts 16 years of experience.
The danger, of course, is that you may be responsible for two mortgages and could get stretched or sunk financially if something doesn’t go according to plan. Because you’re waiting to sell your current home, you typically can’t use your equity to pay for the down payment on the new property (at least, not without taking out an additional loan).
But don’t worry. There are reasonable ways to go about this route. Here’s an overview:
Option 1: Buy a new house and cross your fingers
This option is all about buying your next home first and hoping the real estate gods are on your side. It can work out beautifully, but if your current home doesn’t sell quickly, you could be stuck paying for two houses and a lot of stress along the way.
In a slow housing market dampened by high mortgage rates, homes are less likely to sell as quickly as they would have in a strong seller’s market. Each local market is unique, so consult your real estate agent for conditions in your area.
If you don’t feel confident that your existing home will fly off the market, this option can be scary. In many cases, buying a second home is more difficult than buying your first home. If you’re willing to take a calculated risk, however, this might be a good option for you.
Option 2: Buy with a sales contingency
When you buy with a sales contingency, it means that if your current home doesn’t sell by a certain date, you can back out of the purchase contract without penalties. While this would certainly alleviate some of your stress, sellers don’t typically prefer a sales contingency, as it puts their home sale at risk.
Still, there are situations when a seller might consider a contingent offer. One is when your agent can explain to the seller’s agent that your current home will likely sell quickly. In that case, the seller may take a chance and accept your offer.
Option 3: Buy with a bridge loan
Because many sellers use the money they make from selling their home to finance the purchase of their new house, they can often find themselves in a situation where closing dates don’t align. In that case, the money they need from their current home’s equity isn’t quite available yet. That’s where a bridge loan comes in.
A bridge loan is a relatively high-interest loan, often secured by your current home, that can be used to fund the down payment on your new house and cover expenses if you’re juggling two mortgages. The loan is then repaid after selling your current home, usually within six months.
Homeowners who opt to buy with a bridge loan typically put their current home on the market as soon as they find their new home in hopes of selling quickly and shortening the amount of time that their bridge loan is open.
