Buying a home is difficult, but try selling your home and buying another at the same time. On a level of difficulty, this is the gymnastic balance beam of homeownership.
There are about 86 million homeowners in America. If you’re one of them, and you need to move, there’s a reasonable chance you’ll find yourself facing this challenge. Thing is: If you sell before you buy, the clock will be ticking on finding your next home. But if you buy before you sell, you could get stuck paying two mortgages.
Or, you might have to live in a buddy’s pool house for a while.
Work your social network for temporary quarters
In 1998, Mark Rust and his wife began building a new house and listed their existing home. About six months before construction was complete, the Rusts got an offer on their old house. However, the buyers wanted to move in right away.
Rust sent out a mass email to everyone he knew in the area, looking for a short-term rental.
“One of my oldest friends from high school offered to rent his pool house,” Rust tells NerdWallet. “It was a small, one-bedroom loft place, but had a kitchen and bathroom. We agreed on a rent, put our house contents into storage and moved right in. It was perfect because there was no lease, so we could stay as long as needed, and move out as soon as our new house was ready.”
Plus the couple enjoyed the refreshing smell of chlorine in the morning.
Contingent offers: Not very many pros
Some people in this situation will put a contingent offer on a house — the purchase depends on selling your current home. But that can make an offer less attractive. Contingency offers are less desirable, and, as a listing agent, I frequently tell my sellers to pass up contingency offers because of the uncertainty involved. Instead, I suggest putting your house up for sale first. Once you’ve negotiated and accepted an offer on your current house, then you can get serious about finding and buying a new home. It’s important to note that simply having your home on the market isn’t enough to signify that you’re ready to make an offer on another home. Once you know that your buyer will actually buy your home (preferably once you get past the appraisal period), you can put a good offer in on a new one and really bargain from a position of strength.
A bridge loan or HELOC can get you from one house to the next
Rather than trying to swing a simultaneous buy-sell scenario, you might opt for a bridge loan, which allows you to tap the equity in your current home. With this short-term financing, you can buy a new home before you sell your house. You’re essentially financing two homes at once, temporarily. Once you sell your current home and receive the proceeds, you pay off the temporary bridge loan.
However, few lenders offer bridge loans. An alternative is to tap into a home equity line of credit that you’ve opened previously. Either way, you’ll need pristine credit and plenty of equity in your current home.
Twice the adventure
I tell my clients that buying and selling homes at the same time is twice the adventure, and each situation has unique challenges. Here are some tips:
Use experienced, efficient real estate agents. Not just any agent, but an agent who will be proactive in the process and give you great advice.
Be aware of the market. Typically when it is easier to sell, it is hard to buy. And vice versa. Know which market you’re in, then work on the hardest part first.
Prepare as much as possible in advance. Your time will be limited, so have most of your possessions ready to move. If your current home needs repairs, get them done so this doesn’t hold up the sale.
Don’t get stuck on little things. Keep the big picture in mind — you want a sale and a purchase at or near the same time. This means that some things you might fixate on if only buying, or only selling, will need to take a back seat.
Renting your just-sold home from the new owners, called a lease back, is another short-term solution to the sell-buy conundrum.
Like a balance beam routine, selling a house while buying another is something you just can’t rush. And I always tell my clients to keep the faith! I have done this routine successfully many times before and we will make it to the finish line, too.