Hands exchanging keys to two different houses

Simultaneously, selling your property and buying another home is possible, but the timing is tricky. On the one hand, if you sell your property before buying, you might have nowhere to go after the sale closes. On the other hand, if you buy a house before selling your current property, you could get stuck with loan payments and maintenance costs on both properties.

Ideally, you would sell your property and then use the proceeds of that sale to close on your next home immediately afterward. In practice, this can be difficult because of all the parties involved. The timing needs to also work for your buyer, the buyer of their home, the seller of the home you’re buying, and the seller of the home your seller is buying.

Getting Your Ducks in A Row

Hold Off on the Home Search

Looking at homes can be fun, but it’s a waste of time and resources if you’re unprepared to act. You could fall in love with a place only to lose it to another buyer because you weren’t ready to make an offer.

Worse yet, you could rush into making an offer that gets accepted and then be unable to close if your property doesn’t sell in time and you need that sale to get financing. If that happened, you could lose your earnest money (unless your offer includes a Closing of Buyer’s Property Contingency…more on that later).

Hold off on the home search, and you’ll save yourself time, stress, and costly mistakes. You’ll be in a much better position to look at homes after you’ve got your own property ready to sell and you’re financially prepared to make an offer.

Getting Your Property Ready To Sell

At any given time, there are hundreds of potential buyers who have saved searches for a home like yours. Once your home is listed, these buyers will be alerted by email or text about your property. Your listing will get more attention during the first 24 hours after it’s listed than at any other time it’s on the market. This is a one-time marketing opportunity, so it’s important to avoid blowing it!

You’ve got to make a great impression when your home first goes on the market. Your pictures must look fabulous, your video tour link must work, your condition report and other documents must be attached to your listing, and your home must be ready for buyers to tour immediately. But before any of that, you’ve got to get your property into showing condition.

Family prepacking to move

To get your home in top showing condition, you need to invest most of your prep time in pre-packing everything you don’t need in order to survive over the next couple of months. This includes seasonal clothes, pictures, decorations, books, china cabinets, kitchen appliances, office supplies, toys, electronics, desks, shelving, cabinets, extra chairs, exercise equipment, knick-knacks, trophies, political swag, tools, spare tires, lawn chairs, and extra vehicles. Box and label items to help with moving and then put them in your garage or, better yet, a storage unit for the time being.

You’re moving, and you’ll have to do it anyway, so it’s not like extra work. However, by doing it first, your home will be easier to clean, and it will look more spacious and move-in ready in listing photos, your video tour, and during buyer showings. But most importantly, your home will sell for more money, and you’ll improve your odds of being ready to move out when it’s time to move into your next home.

Getting Financially Prepared To Buy

To get an offer accepted in today’s hot housing market, you’ll need to submit it with a mortgage pre-approval letter or proof of funds.

Mortgage application stamped approved

If you’re going to finance your purchase, don’t wait until you’ve found your dream home before getting pre-approved. Communicating with your lender and getting the paperwork together can take a couple of days, and the home could be sold by then. Worse, changes to interest rates, lending guidelines, or your credit score could put the home out of your price range.

Getting pre-approved first will strengthen your offer and save you time and energy. And, if you’ve already accepted an offer on your current home, getting pre-approved will increase your odds of being able to purchase your next home in time to coordinate the two closings.

If you’re making a cash offer, you’ll need to provide some proof that you have enough liquid assets to make the purchase. If some of the assets you’ll use to make the purchase are not liquid, then you’ll need time to sell them before making any cash offers. Proof of funds could include a copy of an account statement with sensitive data blacked out or a letter from your bank stating that you have sufficient funds to complete the purchase.

Timing Options

While buying and closing at the same time is ideal, sometimes it’s just not possible to find a buyer and seller able to match your schedule. But never fear; closing a few days or weeks apart isn’t as difficult as it may seem if you have a plan. How you go about it will depend on whether you are selling or buying first.

Buying Before Selling

If you have plenty of cash and don’t need financing, buying your next home before your current property is sold makes life a lot easier. For one thing, you can take your time packing and moving stuff directly to your new home without putting it in temporary storage. In addition, removing personal items from your current property makes it much easier to clean, take attractive photos, and show the property….all of which will help you get top dollar when you sell it.

On the other hand, if you need the profit from the sale of your current property to get financing on the home you want to buy, then buying before selling presents a problem. In this case, you have a couple of options.

The buyer's home sale contingency within the offer to purchase

One option is to include a “Closing of Buyer’s Property Contingency” in the offer on your next home. Unfortunately, this will make the offer extremely unattractive to sellers because it could easily come apart if you are unable to sell your property by the contingency deadline. With lots of buyers competing for very few homes on the market, you’d need to make a much higher offer than the competition before a seller would take a chance on such an offer.

The proof of financing option within the offer to purchase

If you can qualify, the better option is to get a bridge loan. A bridge loan is a short-term loan that allows you to buy your next home before your current home is sold. Bridge loans come with origination fees and have higher interest rates than conventional loans. However, the origination fees usually cost less than the increase in the purchase price you’d have to make for the seller to accept an offer with a Buyer’s Property Contingency. And the higher interest rate is only temporary until you sell your home and pay off the bridge loan. You may qualify for a bridge loan if you have a decent amount of equity in your current home, excellent credit, and a low debt-to-income ratio.

Consider speaking with your lender before you start looking at homes. Get pre-approved for both a bridge loan and a conventional mortgage, and you’ll be prepared to make a strong offer whichever way the timing works out.

Selling Before Buying

Selling before buying has its pluses and minuses.

On the positive side, once your home is sold, you’ll have cash, and cash is king.

With enough cash, you can make an offer with no financing contingency and a quicker closing date. Sellers will often accept a cash offer with a lower purchase price because they’re more confident it will actually close.

But even if you can’t afford to make an all-cash offer, not having a home to sell makes getting financing a lot easier, and your offers won’t include the dreadful Closing of Buyer’s Property Contingency.

On the negative side, where are you going to live after selling your property until you close on your next home?

One option is to keep your stuff in storage while you stay with relatives, live in your camper, or take an extended vacation. Who doesn’t need a vacation, right?

The buyer grants seller occupancy provision of Addendum O

Another option, if your buyer agrees to it, would be to rent your property back from them until you can move into your next home. There is an Addendum O that can be used to spell out the terms of such a rental agreement.

Closing Together or No Deal

In terms of timing, the best approach usually depends on how you’ll be paying for your next home. If you’re paying all cash, then you’ll probably want to buy your next home before selling your current property for reasons we’ve already discussed.

But, if you’re getting a mortgage, it’s often best to list your current property before making any offers on another home. You see, as a seller, you are in complete control of when you sell. Just because your property is listed and someone makes an attractive offer, you don’t have to accept it.

If you still haven’t found your next home and you’re worried about not having a place to live after your property is sold, you don’t have to accept an offer until you’re ready. Or, better yet, you can counter an attractive offer to add a contingency that protects you against having to sell until you’ve found or even closed on another home.

Counteroffer with seller's property contingency

The language could be modified to fit your situation, but it could go something like this:

This Offer is contingent upon the closing of the purchase of another home by Seller or before ___________________. If Seller’s purchase transaction does not close by the stated deadline, Seller may, at Seller’s option, terminate this Offer by delivery of written notice of termination.

While a buyer may or may not decide to accept such a counter. If not, maybe there is a middle ground that works for both of you…perhaps making the offer contingent on you finding a home and getting your offer accepted on it by a specific date. There are many ways a contingency could be structured to give you more peace of mind…or you can always walk. As the seller, it’s really up to you.

Conclusion

Buying and selling a home at the same time is possible, and there are things you can do to increase your odds of pulling it off. Even if you can’t close both deals on the same day, there are ways to handle the time gap between closings. And, no matter how the timing works out, there are provisions you can use to protect yourself.

Sources This Competitive Market: Tips and Trends, WRA