Whether you find yourself running out of space and need a larger home, or have too much space and need a smaller home, the problem's the same, you’re ready to buy a new home, but need to sell your current home first. How to coordinate these two events, buying and selling, has, by far, been the number one question I have answered for home sellers over the years.

In most cases, you need the money out of your existing home in order to complete the purchase of your next home. The concern for sellers is they don't want to end up homeless by having nowhere to go or have to find temporary housing until their new home is ready and thus make a double move. This situation is obviously something real estate agents have to deal with all the time. To learn more about how these two transactions are timed watch this video or continue reading below.

Under "normal" market conditions, when someone who wants to buy a new home has a home to sell, it is very common to use what is known as a contingent offer. A contingent offer is exactly what it sounds like, the offer to purchase is contingent upon the buyer being able to sell their existing home. 

In the overheated market that we have experienced the last few years, contingent offers were not seen very often because they are generally not considered as strong as non-contingent offers. If you are a seller, and you receive multiple offers on your home, you are more likely to go with an offer from a buyer that doesn't have a home to sell than one that does. A contingent offer carries more risk because if anything should go wrong with the buyer's home sale, the seller could lose valuable time on the market and have their follow-on plans disrupted.

Options for Sellers

So if you want to buy a new home, but need to sell yours first what are your options?

Contingent Purchase

As mentioned above, you could make an offer on a new home contingent on the sale of your current home, especially but that will put you at a disadvantage compared to other buyers, especially if your home isn’t listed on the market yet.

Lease Back

With a lease back you would be able to stay in your current home until you complete the purchase of your new home. This wouldn’t work for all buyers, but if the buyer of your home is currently renting they may have more flexibility with move dates. You would negotiate the terms and length of the lease-back with the offer to purchase. The lease amount you would have to pay is usually equal to the buyers’ monthly mortgage payment plus taxes and insurance. While the amount you will pay in rent to stay in your current home will likely be higher than your existing mortgage, the convenience of not having to find temporary housing, move twice, and being able to shop for a new home non-contingent will usually outweigh the cost.

Move into Temporary Housing

Although not ideal, this scenario does provide you the maximum flexibility with regard to your next home purchase. Rather than link the two transactions you can complete them separately. Focus on selling your house first. When your current home closes you could move into a rental property for 6 to 12 months or move into an apartment that does short term rentals. There are several in the local area that offer leases as short as two months and will allow you to go month to month after that. You will have to make two moves, but won’t be under as much pressure in your new home search or be forced to settle for something that is less than ideal.

New Construction

Very few homebuilders have standing inventory at the moment. That means delivery of your new home will most likely be 6 to 7 months after you sign the contract to purchase. Many home builders are accepting contingent buyers currently as the risk to them of ending up with a home they can’t sell is very small. Buying a new construction home will give you additional control over your home sale with regard to the timing of the follow-on purchase. CLICK HERE to search all new home communities in the area.

Bridge Financing

Many homeowners have built up a substantial amount of equity in their current home. Bridge financing would allow you to tap into that equity to complete the purchase of a new home before selling your current one. You would need to be able to qualify with your existing mortgage, the new mortgage, and the bridge loan payment counted against your income, but this is a convenient solution if qualifying isn’t a problem. Once you have closed on your new home you can list your existing home for sale and pay off that mortgage, and the bridge loan, at closing.

Bottom Line

Timing the sale and purchase of homes is something that any agent that has been in the business for a while should be familiar with. If you currently own a home and are looking to purchase a new one but have questions about which option is best for you CLICK HERE to schedule a free consultation with me. I’d be happy to walk through the options in more detail and help you determine which one is best for you.