4 Reasons for Buying a House Before Selling (2022)

By Andrew Te

|10 min read

The real estate industry is based on people buying a new property and selling their old property. The question today is, should you buy a house before selling your own?

Benefits of Buying a House Before Selling

There are great benefits to buying a home before selling, that you want to be aware of. Later, we will get into the disadvantages and tips if you are considering buying a property with this method.

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, you’ll 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 reno 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 Before Buying

With those positives in mind, the following are some disadvantages to this method of buying:

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. 

How to Buy a House First Without Selling?

The best thing you can do is close the deal on the home you mean to buy and offer a delayed contract initiation date.

This allows you to secure a deal and it prevents you from needing to pay two mortgages at once. If that option is not available, you may need to pay a second mortgage for a short time while you wait. 

Here are tips on how to buy a house before selling:

Plan the Time of Sale

When you are ready to buy a new house, estimate how long it will take to sell the current property. It is equally as dangerous to assume that your house will sell in a month as it is to assume it will sell in a year, where it might take around 3-6 months.

The time it takes to buy a house should you buy one before selling is entirely dependent on your local real estate market. We recommend that you don’t play the guessing game and conduct some research. You can also find a listing agent for a more accurate time frame.

If you overestimate the selling time, you might end up having to pay two mortgages at the same time or bear the expenses of maintenance of both houses. On the other hand, underestimating the same might lead to giving you less time to remodel and move to your new house.

Renting Instead of Selling

Instead of deciding if you should buy a house before selling, you could consider renting out your old one!

If you do not need to worry about short-term finances, it can be significantly easier to find renters for your old property. This way you can still gain income from the property to cover the original mortgage. 

Now, the average monthly rent for apartments amounts to $1,100, which can eventually dig into the mortgage costs. These rental prices can be higher demanding on location, so it is best to see the prices around you should you decide to rent rather than selling your .

You can also have options by renting, you can consider leasing out the house on a month-to-month basis if you plan to sell the house in the near future.

buying a house before selling

Factors to Consider

These are the most important factors you will need to consider when looking deciding if you should buy a house before selling:

A Second Mortgage 

The biggest hurdle while buying a house before selling is handling the increased financial pressure. You could try taking out a second mortgage, but you need to make sure you qualify for it first. Before making a definitive decision, we recommend you contact your real estate agent or your bank.

The first thing banks will look at will be your debt-to-income ratio. You must have enough assets, liquid or otherwise, to be able to meet the monthly debt you’ll accumulate.

For example, if you owe the bank $4,000 every month and have (excess) assets of $8,000 or above, you have a positive debt-to-income ratio. The bank won’t hesitate to give out the second mortgage.

Banks and lenders often require you to have around 60-67% more assets than your debt. If your debt amounts to more than 43% of your gross income, you might not qualify.

Remember, the mortgage of your current home will also be considered when calculating your debt-to-income ratio.

Be Ready to Move Once Finalized

With financial stability, there’s no need to rush. If you should buy a house before selling, don’t advertise your house for sale yet. Take your time to remodel the new house to your liking, ensure everything is in order and list it when you’re close to moving.

But, if your re-modeler has given you a time frame of 1 month and your listing agent gave you at least 2 months to sell the property, it may be best to start listing the property early and updating the listings as it is remodeled. 

As soon as your new house gets finalized, start moving out. This way, you’ll show buyers that the house is ready to be occupied as soon as possible, thus increasing its value.

buying a house before selling current

Should I Buy a House Before Selling?

There are many advantages and disadvantages to buying a house before selling your own. However, there are many ways to see if this method is best for you. 

This works best if you are financially stable and if you can get approved for the second mortgage. If you need a more detailed view of how sound this decision is, we recommend you contact us.

Andrew Te


Andrew has 7+ years of experience in Real Estate and working with Real Estate Agents. He is passionate about the housing market and solving problems.

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