How To Handle Buying and Selling a Home at the Same Time
The Dilemma: Selling and Buying Simultaneously
You’re ready to move – congratulations! Finding a new home is an exciting journey, but it can be filled with the unknown, especially if you are buying a new home and selling your current home at the same time. Unless you’re a first-time homebuyer, or you feel comfortable carrying two mortgages until you can sell your current property, you’ll need to plan the timing of the sale of your home correctly to avoid any negative financial consequences. The good news is that many homeowners experience this scenario, and understanding the process is your best preparation for success.
Choosing a trusted local agent to help you determine the market value of your current home and talk you through timing, strategy, and negotiation when buying and selling at the same time is key.
Keep the Market in Mind
When buying and selling homes simultaneously, it’s important to understand the current market trends for the locations in which you are buying and selling. In Richmond, market trends can vary greatly––even neighborhood to neighborhood! Neighborhoods within the city limits, like The Fan, Northside, and Woodland Heights are in high demand with limited housing inventory, which leads to multiple offers and high competition. Surrounding neighborhoods, such as Midlothian or North Chesterfield, have calmer market conditions and more inventory from which to choose. A knowledgeable Realtor will help you navigate these complex markets so you can be well informed and make the best decision. If you’re moving out of state, ask your agent to refer you to a Realtor in your new location. Remember––always vet your new Realtor beforehand to make sure you feel comfortable working with them, and that they have the level of market knowledge and industry experience you need to find your perfect place.
Key takeaway: The length of time it takes to buy and sell can vary dramatically depending on the local real estate scene.
Debunking Buyer vs. Seller Markets
I know, I know––all of the “market trend” talk probably sounds overwhelming when you’re potentially dealing with both buyer and seller markets in different locations. Let’s break it down so there isn’t any confusion.
• In a buyer’s market, there are more homes available than people looking to buy. You’ll typically have an easier time buying than selling a home in a buyer’s market. Therefore, sellers may be willing to accept a contingent offer, meaning you agree to purchase their home on the condition that you sell yours first. Read on for more details on this later.
• In a seller’s market, there is more buyer demand in the marketplace than there are homes available for sale. In a seller’s market, your current home will likely sell more quickly than you’ll be able to find a new home. So, consider asking your buyers to do a rent-back (i.e. when you go through with the sale of your home with the agreement that you can rent it back from the new owners) after closing to allow you time to find and close on your new place.
Option 1: Listing Your Current Home First
If the neighborhood you’d like to buy in is super hot, your best bet is to list your current home and get it under contract first so you can move quickly when you find the new home – they go fast!
Buying in a hot market requires making a strong offer. There are a few different ways to make your offer stand out to a seller.
• If you’re looking to buy in a hot market (like the Fan) where competition is high, the strongest way to win a potential bidding war is by making an offer in cash.
• If you can’t make a cash offer, your next best option is to make an offer without a sale contingency (i.e. non-contingent). This means you’ll buy the house regardless of whether yours has sold by the closing date.
If you have significant savings, you may be able to cover many of the up-front costs of buying a new home while still carrying your existing mortgage. You may also be able to acquire a Home Equity Line of Credit (HELOC), which allows you to borrow cash against your existing home equity. Once your current home sells, the HELOC will be paid off with the proceeds of the sale.
Not all buyers are in the financial position to make the types of offers above, so how can you set yourself up for success? Be prepared to move fast in making an offer by getting pre-approved (not just pre-qualified) on your new mortgage. First, make any repairs needed in your current home, then declutter and stage it and have your agent list it for sale. Once your current home is under contract, you’ll have a 30-60 day window to find your new house in the high-demand neighborhood.
Key takeaway: When the market you’re buying in is hot, plan to sell your current home first and be ready to make a quick decision, with pre-approval, when house hunting.
Option 2: Finding Your New Home First
If the home you’re selling is in a hot area, start house hunting before you list your current home, knowing that once it’s on the market, it will likely sell fast! To ensure you get the best offers, prepare your home for selling by tackling any maintenance or cosmetic fixes. A good realtor will make suggestions that really increase your home’s appeal to buyers.
Once you’ve gotten an offer, your agent can help you negotiate a closing date that will give you time to house hunt and go under contract on your new home. When you do find your new home, negotiate for a closing date as close as possible to the one you’ve set on your current home. Obviously, this is an ideal scenario and your closing dates may not line up exactly as you hoped. Don’t panic! If needed, you can ask your buyers to do a rent-back or find a short-term rental during the gap between closing dates.
Moving tip: If you don’t need the cash from the sale of your current home to finance your new one, you can close on your new house before selling your current home to give yourself some additional moving time.
Wrapping it All Up
If you’re buying, selling, or buying and selling, having an expert Realtor to guide you through the process is essential. In addition to my 15+ years of real estate experience, I’ve lived in the RVA area for 28 years––from The Fan, to Chesterfield, Henrico, and the Museum District. My expertise in the market means you’ll get the best advice for your home sale or purchase––or both!