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Published by Contour Mortgage on October 06 2021

Buying And Selling A Home At The Same Time

Editor’s Note: This blog was originally published in September 2020 and has been revised to reflect industry updates.

The currently volatile real estate and housing market can be challenging, with many obstacles to overcome. Now, imagine concurrently selling and purchasing a new home, while also navigating mortgage processes and other moving parts. Without proper planning and guidance, you could face undue stress.

While this can seem daunting, it doesn’t have to be. If you’re considering selling your home while simultaneously trying to buy a new one, there’s some good news: It’s extremely doable! 

Of course, any big-ticket transaction can be tedious, but there are uniquely qualified industry professionals, such as Contour Mortgage loan officers, who can ensure a smooth buying and selling process. 

Consult the following tips and best practices, as well as pitfalls to avoid, when buying and selling a home at the same time. 

Evaluate The Housing Market

This should be step one, regardless if you’re buying, selling, or both. With the current real estate market most likely the biggest factor, understanding the health of the housing market is also important—no matter where you’re moving to or from. You’ll also need to consider whether you’re selling in one market and/or purchasing in another. 

You’ve probably heard of the terms buyer’s market and seller’s market. But what exactly does each entail?

Buyer’s Market

In a buyer’s market, there are more homes available than ready purchasers. Buying and selling simultaneously in this climate means you’ll have a relatively easier time finding a new home than selling your previous one.

Buyers also have the benefit of placing a lower offer. The seller is more inclined to accept, especially for prolonged listings, or lack of solid bids. Rather than avoid a stale listing, or have curtailed relocation plans, sellers are also more amenable to any required repairs or upgrades.

Seller’s Market

In a seller’s market, there are more buyers in the marketplace than homes available for purchase. If you’re concurrently buying and selling in this market, your home could sell before you can find a new one. 

With this current market placing the seller in the driver’s seat, buyers could encounter a more competitive process, such as bidding wars, multiple offers, and unwillingness to cover or complete requested repairs or upgrades.

According to online real estate industry hub Realty Biz News, it’s expected to remain a seller’s market, at least for the foreseeable future,

“Buyers have little to choose from as the number of homes listed for sale is down 22% compared to last year, and homes are staying on the market just 21 days on average,” it states.   

 

Understand Your Financial Situation

After you’ve gotten a feel for the local market, take a deep dive into your personal finances to determine your budget and how much house you can afford. It’s best to consult a mortgage lender to learn what’s possible. The amount of cash you have on hand, any accumulated home equity, and available loan products will determine how you move forward. 

An important part of equity is understanding how much your home will sell for in the current housing market. A pre-inspection of your current home is a helpful way to learn about the amount of work you’ll need to complete before selling, or the potential pricing concessions you’ll have to consider if the buyer covers repairs. 

When you’re selling a house with a mortgage, you’ll need to know how much equity you have—that’s the amount of money left over when you take the current market value of your home and deduct the remaining mortgage. Remember: Your equity won’t be accessible until after the sale closes, so determine if you’re able to purchase a new home without tapping into this. 

 

Buying While Selling Best Practices

To help reduce additional stress and save valuable time during this important process, learn more about some of the recommended tips to consider when buying and selling. Contour Mortgage loan officers are also available for any questions. 

  • Enlist A Reputable Realtor: It’s best to work with the same real estate agent for both transactions. Make sure they are also familiar with the respective area you live in, and where you want to move. Your mortgage lender can make a recommendation, or consult the Multiple Listing Service for more information.

  • Manage Up-Front Expectations: Ensure everyone on your team is on the same page with the end goal in mind. This includes your real estate agent, mortgage lender, attorney, home inspector, and other key players.

  • Create an Action Plan: As aforementioned, perhaps the most important step is ensuring all of your requirements and documents are ready and updated for a smooth mortgage application process.

  • Prepare for Contingencies: Have your financials and alternative living arrangements in place, should your current home sell before you find a new one.

  • Maintain Open Communication: With many moving parts involved in both the selling and buying process, it’s important to ensure all parties are kept abreast of any changes or developments.

  • Research & Decide the Best Financing: Work with a reputable lender, such as Contour Mortgage, on the best option for your budget and lifestyle. 

 

Buying Before Selling Your Current Home

It is possible to buy a new home before selling your current one, but there are steps you should take for a successful outcome. 

Sale Contingency.

Making an offer with a sale contingency means you’ll need to find a new home before listing your current. Then, submit your offer with a sale and settlement contingency. This means you’ll purchase the new home only if you can successfully sell the one you’re currently living in. This contingency plan typically works best in a buyer’s market, when the seller is less likely to get multiple offers. 

Closing Extension.

When you’re confident your current home will sell quickly, you can request an extension of the closing date of your new home beyond the 30- to 45-day standard. Also more successful during a buyer’s market, this tactic provides the necessary time to sell your current home with equity to buy your new one.

Home Equity Line of Credit.

A home equity line of credit (HELOC) grants the power to borrow against the equity you’ve amassed in your current home. If qualified, you can use it for a down payment and then pay it off when your current home finally sells.

 

Selling Your Current Home Before Buying A New One

Depending on your current situation, selling your current home before buying a new one might be the best plan. Consider these tips to help make it happen. 

Clean, Discard & Declutter: Highlighting the home’s best features and assets is the first step prior to listing. If your budget allows, hire a professional cleaning service, and decide what to keep, donate, or discard. With many prospective buyers previewing your home online, it’s important to ensure the best presentation.

Staging & Presentation: According to the National Association of Realtors (NAR), “2019 Profile of Home Staging Report,” 40 percent of buyers’ agents said staging had a profound effect on how the prospective home is viewed, both online and in person. Eighty-three percent of the same agents surveyed said staging helps the buyer visualize themselves as the homeowner.

Get a Jump-Start on Repairs: As aforementioned, consider hiring your own home inspector prior to listing the property. Because they work for you, they’ll unearth any issues, which could be flagged later on. While this could lead to additional expenses, it’s best to resolve on the front end to avoid last-minute price reductions, possible contingencies, and other delays.

Choose a Fair & Competitive Price: With low inventory and rates, some sellers are setting above-value prices. It’s best to ask your real estate agent to review recent comparable sales in your area. Also consider the current state of the property—a new construction will command a higher price than a home requiring sizable repairs and upgrades.

 

Filling the Gap Between Selling & Purchasing

Should your current home sell before you close on your new property, there are several things to keep in mind for a smooth transition. If implementing any of these scenarios, your real estate attorney can ensure appropriate clauses are placed in writing prior to closing.

Settlement Contingency.

Here, your house gets listed first. Then, once you have an offer, you begin looking for a new home. Upon finding a new home, you submit the offer with a settlement contingency. This enables a new home purchase contingent on the sale of your current home. It’s most successful in a seller’s market, when you’re likely to receive several immediate offers.

Rent Temporarily.

There are times when closing one sale before starting another is the best and least-stressful option. While you’ll have to move twice, it takes the pressure off the timing and gives you time to find the exact home you want.

Rent-Back Provision.

This is when you sell your current home with the agreement that you can rent that same home back from the new owners for at least a few days. You’ll get the time you need to shop for a new home, while also having access to the money you made in the sale. This is best in a seller’s market, when buyers are likely to be more flexible with contract terms.

 

The Takeaway

With hard work and an experienced lender on your side, you can make the necessary maneuvers to purchase your dream home, while also successfully selling your current property.



Contour Mortgage provides lending services throughout the United States. Contact us for guidance on how to sell your current home, while concurrently financing a new one. 

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