Buying and Selling Simultaneously – Avoiding a Small Crisis

Buying and Selling a Home at the Same Time? Here’s How to Make It Work.

Timing is everything when you’re both selling your current home and buying your next one. And while it might sound like a logistical nightmare, the process can be surprisingly smooth – if you approach it strategically.

Here’s what to consider when navigating this double move.

In a Buyer’s Market – Free Up Your Equity First

If you own in a buyer’s market, it may take some time for your home to sell. In this case, your best move is to sell first, then buy. This will ensure you are going to actually be able to sell your home in a reasonable amount of time.

Your current home is more than just shelter – it’s likely your biggest financial asset. For many homeowners, it’s also the key to buying their next place. By selling your home first, you unlock that built-up equity and can put it directly toward your next down payment. To make this work, your real estate agent will guide you on the timing of the two transactions.

In a Seller’s Market – Avoid Becoming Homeless (for real!)

If you reside in a seller’s market, you should have no trouble finding a buyer. But! – you may have trouble finding your next home if competition is steep! In this case, you want to buy first, then sell.

How can you buy first? An experienced real estate agent can guide you through the process so you can go under contract on your next home as soon as you find it without having to sell your current home first.

Of course, all bets are off if your home has some kind of defect or obsolescence (something about the property that buyers won’t like). Your going to have to sell first to ensure you’ll have the equity you need to buy. Your real estate agent can generate a seller net sheet for you so you can see the numbers on paper.

What About My Equity?

When you buy first then sell, you probably wonder what happens with your equity. After all, you don’t have it yet. There are a few options available to you.

Mortgage Recasting

Some lenders will allow you to apply your equity later after you home sells. The way this works is you go ahead and secure your new mortgage on your next home. The down payment and terms are all worked out as usual (You will still need funds for a small down payment). But when your current home closes, you can take your equity and apply it to your new mortgage. Your mortgage payments are recalculated based on this additional principal amount that has just been added. The one caveat of mortgage recasting is you have to qualify to carry both mortgages simultaneously for a period of time.

Bridge Loans

If you’re in a situation where you must buy before you sell – or you want to act fast but haven’t closed on your current home yet – a bridge loan might be worth considering. It’s a short-term loan that gives you access to the equity in your current home before it sells. This can help fund your down payment or even cover closing costs for the new place. While bridge loans can carry higher interest rates and some risk, they can also offer a lifeline if you’re navigating tight timelines. Certain lending requirements may apply.

Close Simultaneously to Avoid Two Mortgages

Trying to buy a home before selling often means you may be stuck carrying two mortgages, at least temporarily. That kind of financial stretch can create a lot of pressure – especially if your first home doesn’t sell as quickly as you hoped. One way to avoid having to carry two mortgages at the same time is to time your closing to allow the funds to transfer immediately to your new loan.

How do you close simultanously? If you think through the process, you might imagine you are sitting at a closing table with your buyers and also there is your new home’s seller. Everyone signs and you close on your current home and also on your new home right there – and everyone exchanges keys. Not quite.

The way it actually works is by utilizing an addendum called “Seller Occupancy After Title Transfer.” This addendum gives you, the seller of your current home, the right to remain in your home for a period of time after the property transfers to the new owners. In a strong seller’s market like we’ve had in the Cleveland real estate market for the last several years, this has become commonplace. Buyers are competing for homes and are happy to allow the seller a few extra days and even weeks if needed if that’s what it will take for their offer to be accepted.

Check out the addendum below!

Be Aware: A Selling Contingency Can Hurt Your Negotiating Power – and lose the deal!

In a fast-moving market, sellers love clean offers. If your offer isn’t contingent on selling your current home, it can put you ahead of the pack. Selling first means you’re walking into negotiations with fewer strings attached, which can be a real advantage when bidding on your dream home. That flexibility can also give you more room to negotiate better terms. On the other hand, if your offer says I want to buy your house but I have to sell mine first, that will almost always be a deal-breaker in a seller’s market. They will move on to the next buyer who is ready to close!

The Bottom Line

Selling and buying at the same time isn’t always easy – but it’s definitely doable with the right game plan. Selling first often gives you more control, stronger finances, and a better negotiating position. But if you want to buy first, tools like bridge loans or loan recasting can help make that possible without a home sale contingency. And of course it goes without saying, a cash offer almost always wins.

Every move is different, so make sure you’re working with a Keller Williams real estate professional like Lisa Timko in Cleveland who can help map out a strategy that fits your situation. If you’re ready to talk about how to make this work in today’s market, give Lisa a call at 440-508-6088.