Selling your old home and buying a new one at the same time is a balancing act. That said, it can be done. We’ve taken the liberty of outlining all of your options below. Read them over to decide which ones will work best for you. If you follow this advice, you should be able to create a plan to help the whole process go smoothly.
If you buy before you sell
Buying a new home before you sell your old one is, honestly, the trickier of the two methods. While it’s not impossible, it does require a bit more financial finagling. Sometimes, though, you find your dream home early on in your search. If that happens to you, here are your options:
Use a home sale contingency
The easiest way to deal with this scenario is by including a home sale contingency in any offer that you make. This contingency allows you a set period of time to find a buyer for your old house before you move forward with settling on your new home. If you can’t find a buyer in time, you have the option to try to extend the contract or to back out of the deal.
If this option sounds too good to be true, unfortunately, for the most part, it is. Home sale contingencies aren’t used much these days. Understandably, sellers don’t like them because they offer little-to-no reassurance that the buyer will actually be able to purchase the home. You are, of course, free to include this clause in any offers you make, but be aware that it could negatively impact the strength of your offer.
Get a bridge loan
A bridge loan is another option for helping you deal with the financial strain of buying a new house before you sell your old one. Bridge loans are short-term loans that allow you to pay off the mortgage on your own home so you don’t have to carry that cost. Then, when your home sells, you’d use the proceeds from the sale to pay off the bridge loans.
That said, bridge loans are a gamble. These loans often come with strict terms and high interest rates. In order for a bridge loan to work, both settlements need to go off without a hitch. Even if there is a problem with the settlement of your old home, you’ll still be responsible for finding the funds to pay back the loan on time.
Keep two properties for a bit
Holding two properties at the same time will undoubtedly be a stretch financially. However, if you can afford to do so, it’s also the safest option. This option allows you to submit offers on new homes without having to worry about using a home sale contingency or taking out a new loan.
If you sell before you buy
Selling your old home before you buy a new one is a more financially secure option. This way, you’ll know exactly how much money you have to spend on a new property. However, this method is not without its inconveniences, as well. For instance, you may have to deal with the stress of moving twice within a short period of time. Here’s how to go about doing it:
Use the settlement date to your advantage
The easiest way to avoid the hassle of moving twice is to use the settlement date to your advantage. If possible, try to have the settlement date on your new home fall on the same day as the closing on your old one. That way, you can move directly from one home to the other without pausing in between.
Here, it’s important to remember that writing up an offer is a negotiation. If having matching settlement dates is important to you, you may want to be flexible with other areas of the contract as a gesture of good faith to the other parties involved.
Ask for a rent back contingency
A rent-back contingency is exactly what it sounds like. This provision allows you to rent your home back from the buyer-now-owner from the time of closing until you’re ready to move. Keep in mind, however, that in this scenario, you’re essentially asking your buyer for a favor. They don’t have to agree to rent the home back to you. After all, they may be organizing a buying-and-selling plan of their own. But it never hurts to ask.
Find a short-term rental
If all else fails, you can always find a short-term rental to hold you over until it’s time to move into your new home. The biggest issue, here, is the cost. Short-term rentals are often more expensive than their year-long counterparts. Additionally, you may have to invest in some storage options to hold your excess belongings until it’s time to move.