It can be nerve-wracking to sell your house before you have a new one lined up to buy. What if the sale falls through and you’re left to rent? What if you can’t find a new home in time? These are valid concerns, but with careful planning and some savvy maneuvering, you can buy a house before selling your current one.
In this article, we’re going to go over the benefits and disadvantages of buying a home before selling, how to buy a house before selling your current home, and other important factors to consider.
Benefits of Selling Your Home First
There are a few benefits to selling your home before buying a new one. For starters, you’ll have the proceeds from the sale to put towards your new home. This can be helpful if you’re trying to upgrade or buy a larger home.
But, there’s a lot more to it than that. Selling your home before buying gives you the opportunity to declutter, deep clean, and make much-needed repairs. This can help increase your home’s value and make it more appealing to buyers.
Other benefits include:
1. Buying a House Before Selling Can Actually be Cost-Effective
More people are selling their homes first and then searching the market for new properties. This is pretty standard practice, it seems safe and will hopefully save you from having two mortgages at once.
You can use the proceeds from the sale of the house to buy the new one or to make the down payment of your next mortgage.
A major problem with the traditional method is the in-between time. Now that the property is sold, what if you can’t find another property? There is always a chance that your closing date will come before you are able to find and win the house of your dreams.
In that case, you’ll have to make arrangements to temporarily live elsewhere.
This could get expensive. Not only will you have to pay to move more than once, but you’ll also likely have to pay rent and possibly storage costs. For both housing and storage, renting month to month might not be an option. If you get locked into a longer lease than you need, there is more money out the window.
There is a risk here that you might end up spending more on the relocation costs than you would have with two mortgages. When you buy a new house before selling the current one, you remove this problem.
2. More Time to Move and Make Improvements
When you buy a home before selling you will not be rushed out of your current property. You can take as much time as you need to move your things from one place to the other.
You also will have ample time to make any upgrades or improvements before you move in. No one wants to live in a renovation zone. Buying a home before selling your current one means you don’t have to live with the headache.
It means you can also take as much time as you need to furnish the home for your eventual move-in.
If you are financially secure, you can also wait to sell your older property until the value has risen. Or, you can make upgrades to the property in order to increase its value yourself.
3. Opportunity to Remodel Your Current Home
After you’ve purchased the new property, you can take your time to focus on your older home. You will have time to be fully moved out of the home you are selling in order to make changes and upgrades with less of a disruption to life.
Before listing your property, you should ensure that it is at its best. You should consider staging the home to make it more attractive to buyers. There are plenty of ways to remodel and increase the value of your property. Having time to do these things can increase the likelihood of a higher sale price.
4. Room for Negotiation
If you are in no hurry to relocate, you can afford the luxury of rejecting low-ball offers. Additionally, you can take your time to find a home buyer who is willing to agree to your terms. It’s smart to ensure you don’t get too greedy while allowing time for offers to increase.
It should be noted you will have more leverage on the buying side as well because you may be able to avoid overpaying due to being in a rush to buy.
Disadvantages of Selling Your Home First
Of course, there are a few disadvantages to selling your home before you buy a new one as well. The most obvious is that you’ll need to find somewhere to live in the meantime. This could mean renting or staying with family or friends until you find your perfect new home.
Other disadvantages include:
1. Level of Uncertainty in Terms of Sale
Unfortunately, there’s no telling what type of offers you might get and when. Here, it’s fine to underestimate what you’ll get, but you don’t want to make the mistake of overestimating.
You might end up spending more than you can on the cost of the new property. This could render the return on the sale useless.
2. Two Mortgages
Until you make the sale and the deed is signed off to the buyer, you are bound to your first mortgage as well as your second. This presents a challenge when applying for a second mortgage. In this scenario, buying a house before selling could cause you more problems.
Even if you do qualify, you’ll have to make payments for both mortgages, which can be a significant financial impact.
3. Stress of Coordinating the Sale and Purchase
There is a lot of coordination that goes into selling and buying a home at the same time. This can be stressful, especially if you’re trying to do it all on your own.
You’ll need to coordinate schedules with buyers, sellers, real estate agents, mortgage lenders, and more. This is why it’s important to have a plan and be prepared for any potential obstacles that may come up along the way.
4. Potentially Less Negotiating Power on Purchase Price
If you’re in a hurry to buy because your old property has already been sold, you may have to accept a lower offer than you would like on the new property. This is because the seller knows you need to buy quickly and may take advantage of the situation.
How to Decide Whether to Sell First or Buy First
When deciding whether to sell first or buy first, there are a few factors you need to consider. These include your timeline, finances, and housing market conditions.
How soon do you need to move? If you’re in a hurry to relocate, selling first may not be the best option for you. This is because it can take time to find a buyer and go through the entire selling process.
On the other hand, if you have some flexibility in your timeline, selling first could give you more negotiating power and allow you to get a higher price for your home.
Do you have enough money saved up to cover the costs of buying a new home before selling your old one? If not, you may need to sell first so you can have the funds available for the down payment and other associated costs.
Additionally, you’ll need to factor in the cost of living expenses if you plan on renting or staying with family or friends while you look for a new home.
3. Housing Market Conditions
Are housing prices rising or falling in your area? If prices are on the rise, it may be a good idea to sell first so you can take advantage of the market conditions. On the other hand, if prices are falling, you may want to wait to sell until they start to rebound.
How to Buy a Home Before Selling Yours
If you’ve decided that buying a home before selling your old one is the best option for you, there are a few things you need to do to make sure the process goes smoothly.
1. Get Pre-Approved for a Bridge Loan
Ais a type of short-term loan that can help you buy a new home before selling your old one. This type of loan allows you to borrow against the equity in your old home and can give you the financial flexibility you need to make a quick move.
To get pre-approved for a bridge loan, you’ll need to have a good credit score and a steady income. You’ll also need to have a plan in place for how you’ll repay the loan.
2. Get an Appraisal on Your Home
If you’re planning on taking out a bridge loan, your lender will require anof your current home. This is because the loan will be based on the value of your home.
To get an accurate appraisal, it’s important to hire a qualified. They will take into account the condition of your home, its location, and recent sales of similar properties in the area.
3. Find a Real Estate Agent You Can Trust
If you’re buying a home before selling your old one, you’ll need to find a real estate agent you can trust. This is because they’ll be helping you coordinate both transactions.
Look for an agent with experience in handling simultaneous sales and purchases. They should also be familiar with the bridge loan process and be able to help you navigate any potential obstacles that may come up.
4. Make Sure You Have Enough Cash on Hand
When buying a new home before selling your old one, you’ll need to have enough cash on hand to cover the down payment, closing costs, and other associated costs. You may also need to have money set aside for a temporary increase in your mortgage payments if you plan on carrying two mortgages at once.
If you don’t have enough cash saved up, you may need to get a home equity loan or line of credit against your old home. This can give you the funds you need to make a successful purchase.
5. Be prepared for a shorter timeline
If you’re buying a new home before selling your old one, you’ll need to be prepared for a shorter timeline. This is because you’ll need to move quickly once your offer is accepted.
You’ll also need to be prepared for the possibility that your old home may not sell as quickly as you’d like. In this case, you may need to rent it out until the housing market improves.
If you’re thinking about buying a new home before selling your old one, there are a few things you need to keep in mind. First, you’ll need to get pre-approved for a bridge loan. This will give you the financial flexibility you need to make a quick move.
You’ll also need to find a real estate agent you can trust and make sure you have enough cash on hand to cover the down payment and other associated costs. Finally, be prepared for a shorter timeline as you’ll need to move quickly once your offer is accepted.
To help ease some of the strain of this process, connect with a FastExpert agent today! We’ll help you find a top real estate agent in your area who can assist you with selling your current home and buying your new one.