Are you are currently thinking “I need to buy or sell my house fast,” then you most likely have questions about the process. Should you buy a house first, and then sell your house? Or should you sell your house and then purchase a property? This catch-22 situation can be perplexing, and it can even be overwhelming for a seasoned buyer or investor. Purchasing a home is an enormous task. The research, paperwork, and deadlines can be chaotic. Combine it with simultaneously finding a suitable buyer for your home, and the process might get messy.
Although you can sell and buy a new home at the same time, both activities are unlikely to occur on the same day. You might locate a beautiful house you would like to purchase, but nobody is currently interested in your home. Alternatively, the right buyer might be interested in your home, but you are yet to find a new home to buy. The stars certainly need to align.
Here are factors when deciding whether to sell your house before buying a new one.
Selling Your Home Before Buying a New One
Selling your home first before purchasing a new one enables you to determine the budget constraints of the new house. Furthermore, getting a new mortgage is easier after selling your current home — two mortgage payments won’t be holding you back. Although selling your home first might seem like the best action to take, it has its downsides, too. They include:
- The expenses and emotional stress of living in temporary housing
- The cost of moving twice — you’ll pay double for movers
- The risk of property prices increasing
How to Make it Work
1. Make a Contingency Offer
If you are unable to pay for the new home without selling the old one, make a contingent offer. This means the seller would need be OK with pausing their sale until your sale is complete — and there would need to be a contract written up that binds both buyer and seller to this arrangement. In a more competitive market, this setup may not be the most appealing — but it’s also the most straightforward solution.
2. Look Into a Lease-back or Rent-back Arrangement
With a leaseback, the purchaser accepts to “rent” out your old home in the interim. You either pay the buyer rent or discuss a reduced price on your property. In exchange, you continue staying in your old home for two to three months during your search for a new home. It’s better than relocating into a rental house, and then once more into your new property later.
Buying Before Selling Your Old Home
If you purchase a new home before selling your old one, there is sufficient time to move. It gives you time to renovate your home and increase its value. The moving process is also less stressful. However, if your property takes a while to sell, you might be paying two mortgages. Paying two mortgages at the same time makes it harder to qualify for a new mortgage since your debt to income ratio is likely to be high.
How to Make it Work
1. Consider Bridge Loans
The bridge financing option is available explicitly for people who are selling and buying a home concurrently. A bridge loan is a short-term financial aid to cover the deposit on the home you intend to buy before finding a buyer for your old one. You then pay back the loan after selling your old home.
2. Apply for a Home Equity Line of Credit (HELOC)
You can also acquire a home equity finance or HELOC. The advantage of still owning your old home is you have a property to pledge as collateral. Open a HELOC, and make savings that can entitle you to 85% of the value of your old home minus what you owe.
You might also decide to acquire a short-term loan from your family members to cover closing costs and the down payment. However, some people may feel uncomfortable with the idea of being indebted to a family member. If you feel this way, a simple Google search can reveal hundreds of home loan plans from a wide range of providers in your area. Some lenders can even allow you access to home loans online or on the phone.
According to luxury home builders in Easton, PA, it’s possible to reduce the pressure of selling and buying a home simultaneously or taking any of the two options separately. Study the property market, understand your options, and create a plan for making the process as smooth as possible.
While the process of having to buy and sell your home quickly (or vice versa) seems stressful, there are definitely available options for you. Ultimately, research what’s best for you and your family.