The short answer is absolutely, yes. But, of course, you might have to consider a few details.
You have to understand the market conditions. If it is a seller’s market – then it is probably better if you find a house to buy first and put it under contract, because you most likely won’t have any problems finding a buyer or your house. And if it is a buyer’s market then you might have difficulty selling your house fast enough for you to move to the new place. Of course, you can have contingencies in place. If that is sounds complicated – hiring a local experienced realtor to navigate the process of buying and selling a house at the same time is the best thing you can do to make it easy on yourself.
You’ve recently decided it’s time to buy a new home. Maybe your family is expanding. Perhaps you’re ready to downsize in your golden years. Or maybe your work has gone remote and you can finally make the move out to an area with more space. So, how do you buy a house before selling your current home?
Can you put in an offer on a new home before you’ve sold your old one?
Yes, you technically can make an offer on a new home before selling your old one – but with a big “but” attached. If you’re like most homeowners, you probably need to sell your old house in order to afford your new home. Unless you’ve been approved to hold two mortgages, you’ll need to include a sales contingency.
Sales contingencies are typically big red flags to sellers. They mean uncertainty, which sellers typically want to avoid. If your old house doesn’t sell as quickly expected, it could potentially put the deal at risk.
For this reason, sellers often shy away from offers with sales contingencies. If you must include a sales contingency, you might have a harder time getting your offer accepted. But this is not always the case. The experienced real estate agent will help you buy and sell with contingencies in place.
How do you buy a new home before you’ve sold your old one?
It’s one thing to make an offer on a new home before selling. It’s another thing entirely to actually close on said new home before selling. So can you purchase a new home before selling your old one?
The short answer is – it depends.
If you were to purchase a new home before selling the traditional way, you would need to be able to afford two mortgages at once. For many homeowners, the financial strain of paying two mortgages makes buying before selling the traditional way out of the question.
But let’s assume you’ve saved enough money to afford two mortgages for a period of time and are confident your old house will sell quickly. You’re not out of the woods yet. Your mortgage lender will take your old mortgage into consideration when calculating your debt-to-income ratio.
Debt-to-income ratio is one of the ways lenders determine your ability to afford a monthly mortgage payment. It’s essentially all your monthly debt payments (mortgage, auto loan, student loans, etc) divided by your gross monthly income. If you’re still on the hook for your old mortgage, your debt-to-income ratio will be substantially higher. Your mortgage lender might not approve you for a new mortgage in the first place.
Is selling first a better alternative to buying first?
On paper, it might seem so. In reality, though, selling first and buying later is a woefully inconvenient experience for many homeowners. Here are a few things you’ll want to take into consideration if you’re looking at selling first and buying later:
Living through repairs
According to the National Association of Realtors, the median time a homeowner spends in their home is 13 years. Over that time, you’ve probably made a lot of memories – and left a few scuffs along the way.
In order to get the absolute best price for your home, it’s recommended to get it in tip-top shape before showing. Depending on the extent of the repairs your real estate agent recommends (they’ll be your expert guide in getting your house showing-ready), this could mean anything from a new interior paint job to refinishing floors to a full kitchen facelift. While an important step in getting top dollar for your old house, living alongside repairs (especially if you have pets or children) can be stressful and inconvenient.
Living around showings
So, you’ve wrapped the last of the repairs and your contractors have packed up their toolboxes. You’re out of the woods, right? Not quite. If you’re selling your house while you’re still living in it, be prepared to live alongside showings.
A critical part of the selling process, showings allow your real estate agent to give tours to prospective buyers, highlight the best features of your house, and gauge their interest. Because most real estate agents recommend the seller not be present during showings, you’ll need to be ready to vacate your house (along with your family and pets) when a buyer wants to stop by.
While your real estate agent will do their absolute best to coordinate with your schedules and minimize inconvenience, buyer interest isn’t always predictable. You’ll need to be prepared to pack up the family (and get your house showing-ready) at a moment’s notice.
Moving twice
Getting the timing perfect when you sell before you buy is a tricky task – especially in this market. Houses are flying off the shelves, largely because inventory continues to be low. This means your old house might sell quickly – but finding your new home might take some time.
Because of this, many people find themselves in homeowner limbo: they’ve sold their old house, but have nowhere to go. Oftentimes, the solution to this problem lies in a short-term rental and paying to move twice.
So, how do you buy a house before selling?
If buying and selling at the same time is a risky endeavor and selling before buying is wildly inconvenient, what’s a buyer to do? Luckily, there are a few solutions out there that can help you buy before you sell.
Secure a bridge loan
A bridge loan is a short-term loan and is most often used to help a homeowner buy their new home before selling. Lenders will typically lend you a percentage of the equity you’ve accrued in your old house, which you can then use for the down payment on your new home.
Bridge loans are not without their drawbacks. First and foremost, they are expensive. Because they are short-term loans, lenders will attach high-interest rates to the loan. Origination fees for bridge loans can also be high – sometimes up to 3% of the loan value.
Finally, they are risky. In the instance that your old house doesn’t sell, you are stuck with the debt – and at a very high-interest rate.
Or if your house is in a distressed state and you want to sell it as is – then you might want to sell to an investor cash buyer who will let you move on your timeline.
Choose the right strategy to list your home WITH A LOCAL REALTOR
By working with a real estate agent, you can select the strategy when you need to buy and sell your home at the same time based on the market conditions in your area. Choosing a realtor with extensive market knowledge and up-to-date research can help you select the best day to list your home and maximize your selling success. You don’t have to navigate all the critical decisions alone—an expert local real estate agent can guide you through the process and use marketing tools to craft a stand-out listing for your home.
We Sell Harford Homes is a top-rated real estate agent in Harford County, Maryland and surrounding areas experienced in any situation and property type. Whether you want to sell a condo, townhouse, single family house, or luxury property – we can assure you we will work hard to meet your real estate needs, and provide professional service. Whether you are going through a delicate situation as selling a house in a divorce, need to do a short sale or inherited a distressed house you want to sell, or just need to relocate quickly because of work- we can help you navigate the sale of your house and make it less stressful for you.
We will save you time, money and headaches!