When buying or selling a home, things start to move pretty fast once the sales contract is signed. There’s a time element involved, and the closing date listed on the contract doesn’t leave a lot of leeway. Yet when you buy and sell at the same time, things can get really involved. But they don’t have to if you carefully plan and know how to buy a house before selling your current house.
8 Steps To Buy a House Before Selling Your Current House
Step 1: Should you buy or sell first?
If you can handle two mortgages at the same time, one on your current property and one for the next home, that’s the easiest way to buy a house before selling your current house. In a competitive housing market your current house will likely receive multiple offers, but remember you’ll be facing competition as well when you search for your new home. However, most home buyers can’t afford two mortgages at the same time for two different properties. This complicates the question of how to buy a house before selling your current house.
Many borrowers also need the equity in their home to use as a down payment for the next one. In this instance, carrying two mortgages is not an option. When you make an offer on the next home, your agent will make a “contingent” offer which means “I’ll buy your house contingent upon me selling the one I own now.” Your agent will let you know whether or not this is a viable option in your market.
You can, however, take out a Homesite Direct “bridge” loan which is a temporary secondary loan placed upon the existing property for the amount needed for a down payment and closing costs. If you have enough equity in your current home, the new bridge loan might even be enough to make a cash offer on the next property. The bridge loan is paid off once your current property sells.
Step 2: Work with an experienced agent
This is always good advice, but it’s especially important when you are deciding how to buy a house before selling your current house. Your agent can tell you from the very beginning whether or not a simultaneous close is feasible. If it is, there will be a strict timeline you need to follow. If you don’t know of an experienced agent, Homesite Direct can connect you with one through our list of preferred agents in our Realtor Club.
Step 3: Get Preapproved
To buy a house before selling your current house, you should go into this transaction with the confidence knowing your new mortgage is already lined up. All you need is to find a property. Getting preapproved is an absolute essential in a seller’s market where real estate doesn’t last very long on the market. A strong preapproval letter can help sway the sellers into accepting your offer knowing your employment, income, assets and credit have reviewed and approved.
Step 4: Find the home you want
It’s important to find the home you want to buy before selling your current house. You don’t to be rushed through a home search knowing you may have as little as 30 days to find a new property. Your best bet here is to find an experienced agent who can narrow down the list of homes in the area where you want to live for the price you’re willing to pay.
Step 5: Make your offer
Now you’re on the other side of a transaction. It’s here that you want to make an attractive offer to the sellers. In a competitive real estate market, this can mean making a full price offer. With a strong offer and a preapproval letter in your hand, you’ve almost completed your simultaneous close and bought a house before selling your current house, or during the sale.
Step 6: List your home
Now it’s time to list your current property. This is one of the most important steps to know how to buy a house before selling your current house. While you’ve been shopping for your new home, you’ve also prepared your current home for sale. You’ve made all the necessary repairs and upgrades and even hired a property inspector to complete a full rundown on your current home’s condition. Your buyers will hire an inspector so it’s good to know in advance what issues, if any, need to be addressed.
Step 7: When it doesn’t line up
Sometimes buying a house before selling your current house doesn’t exactly work out. This is when it’s helpful to negotiate a lease-back with your buyers. Even if the closing on your next home is delayed a week, you can ask your buyers if it’s okay to pay them market rent for the additional time you need to close on your next home.
Step 8: Your backup plan
Finally, if the stars don’t align exactly as you want them to and you have to move out of your current home before the next one closes, your Plan B should identify where you’ll live during the gap time between your two closings. This can mean a short term rental and storage facility just in case you need it.
In competitive markets, it is possible to buy a house before selling your current house, but it does take some advance preparation. Work closely with your loan officer and your real estate agent and respond quickly when either reaches out. There’s a lot involved, but you’ve got some professionals behind you who will help guide the way.