Learn how to do it all at once by adding these six steps to your checklist.
Buying or selling a home can be daunting, even in the best circumstances. Combining them can mean stress overload unless you are prepared and have a plan B for when things go awry. Here are some tips to consider when buying and selling your home at the same time.
1. Assess Your Situation
Everyone loves it when the planets align, but how often does that happen? If you don’t plan, then plan to fail.
To prepare for the process of buying and selling your home at the same time, know current real estate trends. The best place to start is with a reputable, experienced Real Estate Agent. This person knows the market situation in your area and in the new area you are considering. An agent will also know if it is a buyer’s or a seller’s market. This is important so you have a sense of how quickly homes are moving and for how much. This, in turn, will help you with your timeline, your listing price, and how much you can afford.
Make sure to choose the same agent for the buying and selling process. Having an agent who understands your situation on both ends will be invaluable. The only times this shouldn’t be the case is if you are moving out of province or if the agent is also working with the seller of your new home.
Remember, you have options. Negotiating the length of your close, rent-backs, short-term rentals, and other ways to bridge the time between buying and selling.
2. Contract Contingency and Bridge Loans
Another key is knowing if you need to sell your current home to have the down payment for your new home. If you do, you need to consider a contract contingency when purchasing or apply for a bridge loan.
Contract Contingency or Conditional Sale means the purchase of the new home will depend on the sale of your existing home. This can be dangerous in a seller’s market and could cost you your dream home if you are not careful. If the market is competitive, the seller may not want to decrease their chances of selling by waiting for you to sell your home. You will need to convince the seller you are in a desirable market, priced right, and your house will sell quickly. If there has been no movement on their property and it has been on the market for a while, then this might be a desirable option for everyone involved.
Bridge Loans might be a great alternative. These loans allow you to own two homes at the same time if you don’t have the money for a second down payment. Make sure you’ve evaluated your options before you make a decision.
3. Factor in the Price of Your Next Home
When setting the price of your home, consider what you want to spend on your new home and weigh this against the market value. Make sure to leave a cushion when considering your new home budget. For example, if your home is assessed at $900,000 and your new home is $850,000, then you know your bottom-line is $850,000. If the market is slow and you don’t get your $850,000, then you know you will be looking at a new home for less. Have a buffer and manage your expectations.
Make sure you cover your sale price with your purchase. If you know the general price range you want for your next purchase, talk with your agent about what you'll need to get from the sale of your current home in order to cover it. Having a professional agent at this time will definitely help.
Knowing what you can afford is crucial. Often, buyers will be upgrading to a bigger home and think because they have a current mortgage, have a down payment, or are making more income they can upgrade. This is not always the case. Make sure you know your limit. By having a Pre-Approved Mortgage, you won’t be setting yourself up for disappointment after you find your dream home.
5. Covering Yourself in Between the Buy and Sell Process
Just in case those planets don’t align on schedule, make sure you have a Plan B. It is rare if the new home closes at the same time as your existing home. A little off in either direction and you could be paying dual mortgages or be homeless.
Make sure you have an emergency fund for such a situation. You may find you are in a hotel for a week or two. You may want to consider short term rental options (like an Airbnb). Consulting with friends and family may also give you some arrangements until your new place closes.
Another option is a Rent-Back Agreement. This provision would have you renting your home back from the buyer (now the owner) from the time of closing until you are ready to move. The buyer does not have to agree to this, and their agreement to this scenario will likely be determined by their own buying and selling situation. But it doesn’t hurt to ask. Have a back-up for this back-up!
6. Selecting a Closing Date and Time
If strategically chosen, the time and date of your closing can make buying and selling at the same time seamless. Banks can take up to two to three days to transfer funds, and those transfers are usually done before 3 p.m. Tip: Do not schedule your closing on a Friday and always choose the morning hours. Having this buffer in your schedule will help close the deal on schedule and as planned.
Now you have your plan, and you are ready to sell your home and buy a new one at the same time. It won’t be without its curveballs, but the process will be a lot smoother and successful with your checklist complete.
Happy home selling and buying!