Should You Buy a House Before Selling Yours or the Other Way Around?
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Richard Haddad Executive EditorClose
Richard Haddad Executive EditorRichard Haddad is the executive editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
When life demands change, many homeowners find themselves caught in the crosshairs of a significant decision: should you buy a house before selling yours, or vice versa?
Buying first offers a seamless transition yet poses potential financial burdens. On the flip side, selling your home first frees up finances but creates logistical headaches that can rush your next purchase.
So, should you buy a house before you sell your house? In this post, we’ll look at factors to consider, unpack the pros and cons, and provide tips on how to tackle this real estate conundrum with more confidence. We’ll also share details about a modern “buy before you sell” solution that can bridge this gap, providing a smoother transition.
Yes, You Can Buy Before You Sell. Why Move Twice?
Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
Should you buy a house before you sell your house?
This decision hinges on numerous personal, financial, and market-specific factors. Here’s a breakdown to guide your thought process:
- Your financial health: Assess your financial stability. Can you afford to pay two mortgages simultaneously if your current home doesn’t sell immediately? If not, buying before selling might strain your finances.
- Market conditions: If it’s a buyer’s market, you might find great deals on homes and might be tempted to buy first. But remember, selling your house might take longer. Conversely, in a seller’s market, your home might sell quickly, but finding a new one could be a challenge.
- Your risk appetite: Are you comfortable with the uncertainties and potential financial risks of owning two properties simultaneously? Some homeowners are OK with this risk, believing that the right home is worth the gamble, while others prefer the safety of a one-at-a-time approach.
- Logistical considerations: Buying before selling can make the moving process smoother. You can transition directly to your new home. However, this approach can also mean maintaining two properties for a while.
- Emotional factors: For some, the idea of selling their current home without having the next one lined up can be anxiety-inducing. If having a sure next step provides peace of mind, buying first might be preferable.
- Long-term perspective: Consider your long-term plans. If you’re looking at staying in the new home for many years, it might be worth buying it when you find your perfect match, even if it means juggling two properties for a while.
The decision boils down to your individual circumstances, preferences, and comfort levels. To further help you decide, let’s take a quick look at the key pros and cons of each route.
Pros and cons of buying your house before selling
Pros
- Peace of mind: By securing a new home first, you eliminate the uncertainty of where you’ll relocate. This means no frenzied house hunting after your current house is sold.
- Smooth transition: You can move directly from your old house to the new one, avoiding the need for temporary housing or storage for your belongings.
- Strategic position: In a competitive market, buying first ensures you don’t miss out on your dream home just because you’re waiting for your current home to sell.
- Flexible timelines: You have the luxury of time to plan your move, decorate, or even carry out renovations in your new home before settling in.
Cons
- Financial strain: There’s the looming possibility of juggling two mortgages if your current home doesn’t sell quickly.
- Market risk: If property prices drop after your purchase but before your sale, you might end up selling your old home for less than anticipated.
- Pressure to sell: Having purchased a new home, there’s added pressure to sell your current house quickly, potentially leading to rushed decisions or lowered selling prices.
- Tied-up equity: The equity from your current home, which could be used to finance or reduce the mortgage on the new one, remains inaccessible.
Pros and cons of selling your house before buying
Pros
- Financial clarity: By selling your home first, you’ll know exactly how much money you have from the sale, allowing you to set a clear budget for your next purchase.
- No double mortgages: You avoid the potential burden of paying two mortgages at once, offering financial relief and fewer complications.
- Negotiation power: Without the pressure of a house waiting in the wings, you can be more flexible and strategic in negotiating the sale price of your current home.
- Freedom to wait: Without a new home already in the picture, you can take your time to find the perfect next house without rush.
Cons
- Housing gap: There’s a risk of a time gap between selling your current home and buying your next one, potentially leading to the need for temporary housing.
- Rushed decisions: The pressure to find a new home quickly can lead to hasty decisions or compromises on what you truly want.
- Market volatility: If property prices rise after your sale and before your purchase, you might end up paying more for your next home.
- Temporary inconveniences: Moving twice, first into temporary housing and then to your new home, can be logistically challenging and stressful.
Understanding the sale contingency clause
When you’re trying to buy a new home before selling your current one, you might encounter or consider a sale contingency clause. This is a contractual provision in your offer to purchase a new home that states the deal is dependent upon your existing home selling within a specified timeframe.
- How it works: If you include a sale contingency in your offer on a new home, you’re essentially telling the seller, “I’ll buy your house, but only if my current house sells by this date.” This protects you from the financial burden of owning two homes simultaneously. If your home doesn’t sell within the agreed-upon period, the contract on the new home can be dissolved without penalty to you.
- The double-edged sword: While a sale contingency offers crucial financial protection, it can make your offer less attractive to sellers, especially in a competitive market. If a seller receives a non-contingent offer (from a buyer who doesn’t need to sell a home first), they might prefer that offer, even if it’s slightly lower, because it presents less risk and a more certain closing timeline. This is why programs like HomeLight’s Buy Before You Sell aim to eliminate this contingency.
HomeLight’s solution: The Buy Before You Sell program
Balancing both sides of a move can feel like walking a tightrope, especially when you’re trying to buy a new home while selling your current one. HomeLight recognizes this challenge and offers a solution tailored for homeowners like you: The Buy Before You Sell (BBYS) program.
How it works
HomeLight’s Buy Before You Sell program is available in most states throughout the country. This short video provides an overview of the process.
- Talk to a loan officer to get qualified and approved: Find out if your property is a good fit for the program and get your equity unlock amount approved in 24 hours or less. No cost or commitment is required.
- House hunting and close on new home: Once you’re approved, you’ll have access to a portion of your equity in your current home. You’ll be able to submit a competitive offer with no home sale contingency at any time — regardless of how long it takes to find your dream home. Our near-instant Equity Unlock Calculator lets you estimate how much equity we can unlock from your current home.
- Sell your former home with peace of mind: After you move into your new home, work with an agent to list your unoccupied home on the market to attract the strongest offer possible. You’ll receive the remainder of your equity after the home sells.
Benefits
- Flexibility in timelines: No need to sync up sale and purchase dates perfectly. This program gives you breathing space to plan your move without feeling hurried.
- Financial peace of mind: Say goodbye to the stress of potential double mortgages or dipping into savings to bridge the gap between homes.
- Enhanced buying power: In a seller’s market, a non-contingent offer can stand out, increasing your chances of landing your dream home.
- Sell for more: After you move, you can list your old home unoccupied and potentially staged, which can lead to a higher selling price.
For homeowners caught in the push and pull of wanting to buy a new home while still having a current home to sell, HomeLight’s Buy Before You Sell program offers a convenient and stress-reducing solution. It’s all about empowering you, ensuring your real estate journey is as smooth and rewarding as possible.
*HomeLight Buy Before You Sell is available in most U.S. states. See more program details at this link or call 855-999-7971. You can also check with your real estate agent about availability and pricing in your market.
Real-life testimonials
Buy Before You Sell customers Hunter W. and Angela B. of Sunland, California, described their experience with HomeLight:
“We not only had the advantage of moving into our new home before listing our old home but also were able to sell for more than expected.”
(Their old home sold for $159,000 over asking price.)
As a real estate solutions company, HomeLight also offers other services for homebuyers and sellers nationwide, such as Agent Match to find the top-performing real estate agents in your market, and Simple Sale, a convenient way to receive a no-obligation, all-cash offer to sell your home in as little as 7 days.
Addressing buying services provided by HomeLight, Joseph A. of San Diego, California, writes:
“I couldn’t be happier with my experience with HomeLight and their amazing staff! I can honestly say that it’s been my best experience with any of the seven property purchases I’ve made over the years. They were responsive, helpful, and patient. I couldn’t recommend them more highly.”
HomeLight was founded in 2012 and has an accredited A+ rating with the Better Business Bureau. The company has earned a 4.8-star Google Review rating from past clients. You can read more customer testimonials at this link.
Curious What Your Home Is Worth?
Get a near-instant real estate house price estimate from HomeLight for free. Our tool analyzes the records of recently sold homes near you, your home’s last sale price, and other market trends to provide a preliminary range of value in under two minutes.
6 tips to balance a buy-sell transaction simultaneously
Here are some final tips to guide you through your decision process:
- Engage with a trusted Realtor: Collaborate with a seasoned real estate agent, especially one familiar with buy-sell transactions
- Talk to lenders or financial advisors: Know what you can afford and understand the potential risks of dual mortgages or bridging loans.
- Have a contingency plan: This might mean considering short-term rentals, storage solutions, or flexible move-in dates.
- Stay organized: Keep detailed records, maintain a timeline, and use tools or apps to stay on top of tasks and appointments.
- Negotiate flexibly: Understand that both buying and selling might require some level of compromise, such as move-in dates, repairs, or pricing.
- Maintain your property: Ensure your current house remains in show-ready condition. The better it looks, the quicker and potentially more profitable the sale.
Frequently asked questions about buying and selling
Another clever tactic that can help bridge the gap between selling your current home and moving into your new one is a rent-back agreement. This arrangement is negotiated as part of the sale of your existing property.
- How it works: In a rent-back agreement, the buyer of your current home agrees to “rent” the property back to you (the seller) for a set period after the closing. This means you sell your home, receive the proceeds, but get to remain in the property for an agreed-upon duration, typically paying rent to the new owner.
- Benefits for sellers:
- Avoids a double move: You can move directly from your old home to your new one, eliminating the need for temporary housing or storage.
- Access to funds: You gain access to the equity from your sold home immediately at closing, which can then be used for your new home’s down payment or other expenses.
- Flexible transition: It provides a buffer period, allowing you more time to pack, arrange utilities, and prepare your new home without feeling rushed.
- Considerations: Rent-back agreements require the buyer’s willingness and typically involve clearly defined terms, including the rental rate, duration, and responsibilities for utilities and maintenance during the rent-back period. Your real estate agent can help you negotiate these terms effectively.
A Home Equity Line of Credit (HELOC) allows you to borrow against the equity you’ve built in your current home. It’s a revolving line of credit, similar to a credit card, where you can draw funds as needed, up to a certain limit. Homeowners sometimes use a HELOC as a “bridge” solution by leveraging their current home’s equity to secure funds for the down payment or even the full purchase of their new home, before their existing home has sold.
Using a HELOC can offer several advantages for buying before selling:
- Access to cash: It provides readily available funds from your existing home’s equity for your new home purchase.
- Affordable payments (initially): HELOCs often come with interest-only payment options during the draw period, making initial monthly costs manageable.
- Flexibility: You only pay interest on the amount you actually use, and you can draw funds as needed within your approved limit.
While convenient, HELOCs come with notable considerations:
- Processing time: Securing a HELOC can take time, potentially delaying your ability to make a quick offer on a new home.
- Variable interest rates: Most HELOCs have variable interest rates tied to the Prime Rate, meaning your payments can increase if rates rise.
- Impact on new mortgage qualification: The HELOC itself is a new debt. This can affect your debt-to-income ratio (DTI), potentially impacting your ability to qualify for the full amount of the new mortgage you need.
- Dual mortgages: You’ll be making payments on both your original mortgage and the HELOC, creating a significant financial burden until your first home sells.
- Equity requirement: You typically need substantial equity (often 20-25% post-loan) in your current home to qualify for a HELOC.
HomeLight’s Buy Before You Sell (BBYS) program is designed to directly address many of the challenges and risks associated with traditional bridge financing like HELOCs, offering a more streamlined and less stressful experience:
- No dual mortgages: With BBYS, you avoid the financial strain of managing two mortgage payments simultaneously, which is a major concern with HELOCs.
- Non-contingent offer power: BBYS allows you to unlock a portion of your equity upfront and make a strong, all-cash, non-contingent offer on your new home. This makes your offer highly competitive, unlike HELOCs, which still tie you to traditional mortgage qualification.
- Financial peace of mind: The program aims to provide financial certainty and reduce the stress of juggling timelines and potential double payments that come with a HELOC.
- Simpler process: BBYS offers a straightforward qualification process, often approving your equity unlock amount in 24 hours or less, without the typical processing delays of securing a new credit line like a HELOC.
- Sell for more: After you move into your new home, your old home can be listed unoccupied and potentially staged, which often leads to a higher selling price compared to rushing a sale while living in it. This contrasts with a HELOC, which doesn’t directly facilitate a better sale of your old home.
Whether you buy or sell first, HomeLight can help
Mastering the dance of buying and selling a home simultaneously may seem daunting, but there are ways to remove uncertainties and determine whether you should buy a house before selling yours or the other way around.
While both approaches have their merits and challenges, the right choice largely hinges on your unique circumstances, market conditions, and personal preferences.
At HomeLight, our commitment is to illuminate your real estate journey. Whether you’re drawn to our trusted Buy Before You Sell program or seeking expert insights from a leading real estate agent in your city, we’re here to assist.
Header Image Source: (Aubrey Odom/ Unsplash)
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