You’re looking to upgrade your starter home to something more luxurious. However, before you put your old house on the rising market, should you sell it or buy the new property first? It is not easy to buy and sell a house within a limited time period. The whole process of selling and buying at the same time can be seamless if you follow the correct timeline.
Depending on the market in your area, you have several options from which to choose.
Follow the right timeline
Sell before you buy
Many people choose to sell first to eliminate the financial stress and twice the moving hassle. You also have some time, albeit not much, to search for your dream home after you sell.
Plus, it is not easy to pay two mortgages at once. Selling before you buy also lets you keep track of money to save for the new property.
However, the biggest problem that comes with this choice is that it puts you in a state of limbo before you find a new home. If you don’t find a new property fast enough, you may have to crash somewhere else, whether at a motel with your stuff in storage or your parents’ place.
Buy before you sell
This strategy works for those who can afford two houses simultaneously. Typically, you should be able to show your lender that you have sufficient means to afford two properties before you qualify.
With this method, you can move into your new house without the hassle of temporary housing, storage or extra moving costs. You can also take your sweet time selling your old place and not settle for a lower price.
However, this option is only feasible if you have enough cash available. You will have to manage two mortgage payments, closing costs, down payments, moving costs and double the maintenance expense.
Simultaneous settlement on the same day
Another option when selling and buying at the same time is doing the buying and selling process on the same day. It is hectic but not impossible. With the help of a mortgage broker or a good real estate agent, you can negotiate a perfect timeline of simultaneous settlement.
Usually, closing is delayed if you are unable to find a mortgage or need to fix some house issues.
Plan your finances
Sale contingency
If you are in the real estate market, you may have heard of a “sale contingency.”
A sale contingency is a clause in a contract that allows you to back out of the deal if your home doesn’t sell within a certain time frame.
Although sale contingency can protect you from paying two mortgages, it may make your offer less attractive to sellers.
Rent-back agreement
When looking to offer your house, you can request a rent-back agreement. This agreement lets you rent your house back.
Rent-back agreements can be beneficial if you need to sell your home quickly but don’t have a new place lined up. Buyers may be more likely to agree to let you stay and pay rent during the renovation process.
Ask for an extended settlement period
When selling and buying at the same time, you can always ask for an extended settlement period from the buyer. If they agree, you can extend the settlement date if you’re certain your house will sell soon .
Of course, you will need to have a good reason for why you need the extra time. For example, if you’re selling your home and moving to a new city for a job, you may need more time to pack and get everything in order.
Home equity or bridging loan
If you’re looking to buy a new home but don’t have the cash for all the associated costs, you may want to consider a home equity or bridge loan.
A home equity loan uses your home’s equity fund for a new purchase. Bridging loans are a type of short-term loan from a bank that can finance the new home purchase before you can sell your current property. Both loans typically have a term of six months to one year and carry high interest rates.
Whatever option you choose, discuss it with real estate agents to negotiate the best possible deal.
