Buy and sell homes at once - what comes first - people with moving boxesIt can be a little nerve-wracking to sell one home and purchase another at the same time. How do you buy and sell homes at once – without losing your mind?

Talk to a lender first

It is a very good idea to talk to a great lender upfront and to be pre-approved. That way, you’ll be more certain of what you can truly afford, and no matter which order you plan to do the two house juggle, you’ll be ready.

The main options when you want to buy and sell homes at once

These are the most commonly used strategies to buy and sell homes at once:

  1. If you have equity, pulling money out of the current house may be an option, or perhaps you can use a bridge loan, you may be able to buy the next home first.
    • In that case, you can move to the new home, then stage and sell the current one. For most people, this is less stressful.
  2. Or will you only purchase after you have cash in hand?
    • With this approach, you could move out and stay in a rental, stage and sell the home and then buy the next residence with cash in hand.
    • Or you could live in the home while it is marketed, sold, and closed.
      • You may be able to stay on after the close of escrow as a renter in your home for up to 60 days. That is often enough time to buy and close on the replacement property.
      • You might be able to have a longer close of escrow and be able to purchase the home “subject to the successful close of escrow” of the current place. This is not the most viable way to buy in our current, inventory starved market, though.
  3. Another option is to move out, rent a temporary residence, sell, and then buy. Depending on the rental, your own belongings could furnish it, or you could have your things in storage.

Possible option 1 – buying first & moving out to sell

If possible, many people doing these two major transactions at once prefer to purchase first. the advantages include not having to move twice and not having to live in a home that is being shown, inspected, and requiring a pristine condition at all times.  For people working from home and families with young kids, this is often the way to go, as it is too disruptive to live there during the marketing and sale process.

The disadvantage is that it is costly to carry two mortgages, which would be the case for most consumers. It requires having enough equity if the approach includes using a home equity line of credit, or HELOC, or a bridge loan. Bridge loans can be at a higher rate than what you’d have for a regular first mortgage, but it’s intended for short term use. The cost may be less than moving twice or storing your home’s furnishings.

To buy and sell homes at once with the least hassle, this is the way to go.

Possible option 2 – living in the home while it’s on the market, in escrow, and closing

This option is easiest for a smaller number of residents who are seldom home and where it’s not hard to keep the house tidy and accessible for showings.

With a buy and sell cost savings strategy foremost, this may be very attractive, particularly if a rentback can be used for 30-60 days to purchase the next home and IF your home can look as appealing as a professional staged one.

The rentback for 30-60 days may provide enough time to purchase and close on the next home. It’s not guaranteed, though, so it’s good to have a backup plan (usually that means storage and a temporary rental or staying for a while with family and friends).

The rentback cannot exceed 60 days because the buyer’s lender won’t permit it as an owner occupied purchase and instead charges a higher interest rate as it’s categorized as an investment property. Of course there are issues around rent-backs, so it’s not without some consideration.

Alternatively, a longer escrow has been a workable option in the past, when the market was more balanced, and the next home could be bought with a contingency to get the current home sold and closed.  For more this topic, please read What is a contingent offer? on this site.

It is sometimes possible to do a concurrent close, where both homes record the same day, but it’s fairly rare.  So if you are shopping for homes and have chosen one to bid on, once your home sells, you can make an offer on the one you like. Typically the home you’re selling will have a longer escrow – right now our typical escrows are 30 days, so you might structure yours to be 45 or 60 days.

Whether it’s a longer escrow or a rentback is used, for most sellers it’s a good idea to just take a vacation or otherwise be absent for the first 7 – 10 days that the home is on the market, as that is when the majority of visits to your home are likely to take place.

Possible option 3 – moving out, renting, and buying after the first home closes

To buy and sell homes at once, many homeowners decide to store their furniture and stay in a short term rental (like a Marriott Residence Inn or an Air B &B) for a month or two while they locate the next home. Others may get a month to month rental with their own belongings in it, which may be less expensive, but each person would have to do the math  to see which is more cost effective.

With this plan, sellers looking to be buyers don’t have to worry about keeping the house immaculate or being disturbed while working from home or worrying about getting pets out of the way. Moving twice is not cheap, but it may be less stressful than living in the home during the sale period.

Special situation: buy and sell a house at the same time when downsizing

For homeowners who are downsizing, or “right sizing”, any of these options may work. It can take a lot of time to sort through what needs to go to the next house, what should be donated, and what should be tossed. We strongly recommend doing this step while still in the larger space, as it will be far worse to ship everything to the new, smaller location and then try to sort it there (or worse, in a storage locker, where there is not usually any space left once the boxed are stacked).

For older homeowners, to sell a house under any circumstances, even when not living in it, is highly stressful, so we would suggest taking option 1 or 3, or some variation of them, such as temporarily moving in with family, to avoid the chaos of being present during the marketing, sale, and closing of the home.

Special case: buy and sell homes at once for relocating people

It’s probably trickiest for those relocating to far away areas to pull off a simultaneous purchase and sale since the timing is so tricky. The distance can make moving only once very challenging since the good homes tend to go fast, and it’s imperative to jump on them quickly.

 

Buy and sell homes at once – related reading

Sell one home and buy another (on popehandy.com)

Pricing your Silicon Valley home competitively (on popehandy.com)