Most first-time home sellers never think about how tricky this process can be… Until they do it. Buying a new home while you’re still living in your current home can create a long string of dominoes. And if just one of these dominoes fails to tip over in the line, the whole thing falls apart. Today I’m going to walk you through the entire process, to ensure that all the pieces come together easily for you!
Here are the 3 options to buy and sell a home simultaneously:
Option #1: Closing Contingent
Most homes are sold on a contingency. In this case, you would put an offer in on a new home – but you would only be obligated to buy it if someone buys your current home. In essence, if your buyer falls through, then you reserve the right to back out of the new home’s contract as well. The obvious drawback to selling a home contingent is that it transfers all the risk to the home seller, and most home sellers don’t want to assume that risk on behalf of their buyer. This is especially true if you’re trying to sell a home in a really competitive market.
Option #2: Own Both Homes Temporarily
This is a viable option if you can afford to carry two mortgages. In this case, you would get a mortgage on the new home, and wait to move out of your current home until you’re ready.
This process is helpful when your new home needs major renovations, but you don’t want to move in until the renovations are complete. It’s also helpful when you’re turning your old home into an investment property and you’re planning to rent it out after you move into your new home.
But there are several drawbacks. First, you’d need to be approved for a second mortgage, which is entirely up to the bank’s discretion. Second, you’d have to pay both mortgages simultaneously. Third, you can’t apply the funds from the sale of the first home towards the purchase of the second – which means you’d need to come up with the down payment out of pocket.
Option #3: Ask for a Seller Leaseback
Most home sellers are unaware that they can sometimes stay in their current home after it sells by renting it back from their buyers. Yep, it’s called a seller leaseback. In this case, you would get all of the proceeds from the sale without having to move – which gives you both the time and money to purchase a new home.
Of course, the big drawback is that it transfers the risk to the buyer and most buyers are hesitant to take the risk of renting their new home and prolonging their own move in date. Again, buying a home when you have a home to sell can be tricky business. I’ve seen transactions where 3 (or more) families are all buying and selling contingently, which creates a really long string of dominoes!
Orchestrating a transaction like that is an art form and you need a great real estate agent who can guide you through that process.
If you’re thinking about making a move (or know someone who is), I can help! Send me a DM or give me a call. No pressure, no sales tactics, just helpful advice and the guidance you need!