Purchasing or selling a house can be an intimidating process. But, the process is more complicated when doing both simultaneously. You have to attend to your old home and your next home at the same time.
Suppose you’re selling a house and buying one simultaneously. In that case, you must manage the transitioning real estate market as both buyer and seller.
There is increased pressure and contest for available properties in a market with more buyers than homes, like in a seller’s market. On the other hand, you may have to offer contingencies as a seller in a buyer’s market. In either situation, you’ll be at the mercy of competitive markets.
Although there is no guarantee the process will be simple, preparing an efficient strategy in advance can assist you in managing any potential difficulties.
We will review expert tips to answer some of your questions about buying a new house and selling an old house at the same time.
Buying and Selling a House at the Same Time
When purchasing a new home and unloading an old one, there’s always a need for one transaction to take precedence. In some instances, individual preference determines priority. Yet, in other cases, you might have a new property in mind before you even consider listing your existing property and selling it to a new owner.
Whatever route you decide to take, these expert tips can guide a successful transaction while simultaneously reducing stress levels throughout the buying and selling process.
Buying a House Before Selling
For some fortunate home buyers, purchasing a new home is as simple as signing on the dotted line. However, many must wait until their existing property sells before making an offer on another. Another consideration is whether you want to use a real estate agent or not.
If you require the funds from your sale to finance a new house, you’ll need to make an offer contingency. That offer gives you a predetermined time to sell your current property and secure your finances for a different residence.
For prospective homeowners who have an eye on making a contingent offer, here is what you need to know:
- Make an offer contingent on your home sale. Including a sale contingency within your purchase agreement allows you to withdraw from the transaction if selling your home becomes infeasible. This clause grants you impunity when canceling and can save you from forfeiting any down payments made.
- Use a home equity line of credit. You can use a HELOC to help pay your down payment. Before you take on a new home and a new mortgage, you must pay the HELOC back.
- Give yourself time to sell your home. An extended closing date can provide the time needed to sell your home. You can negotiate such a request in any purchase proposal. With this added cushion of time, finding a buyer becomes much more manageable.
- Be proactive about selling your home. It would help if you devoted time to getting your house in order before listing it. A well-staged home will likely appeal to potential buyers.
Selling a House Before Buying
Sometimes, it could be wise to sell your old home before you know what the future holds. This way, you can secure potential profits and liquidate your home equity even if you still need to determine where to move next.
If you’re getting ready to sell a house before buying a new home, consider the following tips:
- No-contingency offers are more substantial offers. If you don’t have to sell your current home before making an offer on a new one, this will show the seller that you are serious and committed. Furthermore, when you’ve already sold your home beforehand, it allows for more precision in calculating your down payment.
- Negotiate a lease-back period. A rent-back option allows you to rent your home for up to 60 days after selling it. You can negotiate this with the realtor. You can think of this as a short-term rental for a predetermined period of time.
- Find a storage unit. Before taking pictures and advertising your house for sale, you should ensure that the home is uncluttered. If you need a place to stay while searching for a new home, storage units can hold property during this time.
Financials Required For Buying and Selling a House at the Same Time
Before you begin house hunting for your dream home, calculate if it is, in fact, within your budget. Any equity from the sale of a current property won’t be accessible until closing on the new house; thus, cash reserves may be necessary to cover down payment costs.
As a result, you may have to get creative with your mortgage lender as you navigate the current market.
Some things you’ll have to consider are the following:
- debt-to-income ratio
- credit score
- cost of temporary housing
- current mortgage rates
Bridge loan
Alternatively, bridge loans offer a beneficial solution to bridging the gap between buying and selling. These are short-term forms of financing that can easily be used by those looking for additional financial assistance.
Consider a bridge loan if you need more funds to cover your down payment. This option utilizes the equity in your current home as collateral for a short-term loan. This way, you can use the borrowed money from your existing residence towards the required amount for your new house.
When looking for a loan option, remember that lenders will present shorter terms on these loans, and the interest rates may be relatively high. You’ll likely have to pay off the entire amount within six months up to one year; moreover, you may need to make a lump sum payment as soon as your funds become available from the sale of your property.
Contingency offer
If your existing house does not quickly sell, you might pay for two home loans- an undoubtedly precarious financial situation.
If you feel the financial strain of two mortgage payments, one plausible solution is to make a contingent offer. This requires that your purchase of the new home depends on if and when your current house sells.
Fortunately, this doesn’t come with any risk: if it doesn’t sell, you will lose no earnest money. Although such an action limits potential losses, it also weakens the potency of your proposal.
Buyers are willing to go the extra mile and waive appraisals, inspections, and more to make their offer stand out from the competition. It is becoming increasingly common for buyers to have few or no contingencies as they strive for a successful sale.
Key Documents Needed to Sell a House
Are you planning to put your home up for sale?
If so, ensure you locate the necessary paperwork and documents. Though not a complete list of all items required, this guide will provide an excellent starting point in understanding what documentation is essential.
Mortgage loan documents
When attempting to sell your home, providing paperwork that displays information about any mortgages you may have is mandatory.
This documentation must show details about the following:
- your account
- amount owed
Contact the bank, lender, or loan servicer associated with your account to get this paperwork.
As the U.S. Consumer Financial Protection Bureau requires, this document will display your exact payoff amount. You must pay this sum to fulfill your loan.
Remember that the payoff amount you receive from your loan servicer won’t equal your current balance. Your current account balance does not factor in any interest accrued up until the date of payoff, whereas this is included in the total payout figure.
If your loan servicer fails to provide this number upon request, inform them that it is a legal requirement and must be given out promptly.
Seller’s Disclosure
Selling your house can be daunting, often requiring disclosure documents and laws you might need to learn about.
All states have regulations regarding disclosing any issues with a home that is up for sale – making potential buyers aware, so they are informed when making their decision. Preparing this document is essential if you’re planning to sell your house.
Regardless of your location, state laws typically follow the same format. Be aware that different areas may demand extra paperwork; it’s essential to examine local regulations first-hand when engaging in such transactions.
When it comes to disclosing information, you’ll reveal the following:
- asbestos presence
- environmental toxins around the area
- past occurrences of violence on the property
- legal conflicts over ownership
- existing annoyances in nearby neighborhoods.
According to the U.S. government’s regulations, you must provide a lead-based paint disclosure for any residential building constructed before 1978.
Original Deed
If you’re ready to sell your house, the original deed issued when you purchased it is needed. Due to many sellers acquiring their deeds years ago, finding an available copy can take time and effort.
You may explore your city recorder’s office to gain access to property sale records.
Should this route not be feasible, consider asking the previous title company to pay a visit to your local recorder’s office for your part.
Finally, if you want to save yourself the hassle of locating a deed on your own, there are third-party services that specialize in this. The fees vary, but they can do all the legwork for you.
Tax Documents
You must present documentation of paid property taxes to determine what the buyer will pay in property taxes. Most commonly, this is done by showing your most recent tax bill so they can get an accurate estimate.
Be aware that you may be responsible for unpaid property taxes between sale and closing. The amount you owe will depend on the laws in your local area.
Original sale contract
You must present the original sale contract when you’re ready to put your home on the market. It provides buyers with transparency and essential information such as:
- Original sale price
- Disclosures
- Proof of ownership
- Terms of purchase
Final purchase agreement
The final purchase and sale contract is a thorough document that covers all the crucial details of the deal, including:
- earnest money amount
- sale price
- terms of closing
- disclosures
- tax information
Getting House Appraisals
While a pre-listing appraisal is not mandatory for selling your home, it may be beneficial. In any case, buyers often need an additional and independent appraisal from their lender before closing.
Often, obtaining a pre-listing appraisal helps augment your pricing strategy. An inspection will typically cost $350.
Here are the steps to get a home appraisal:
Find a professional appraiser
Hire a qualified residential appraiser who has extensive local experience. By doing so, you can be sure that the appraisal will accurately represent your property’s worth.
Prepare for the appraisal
Appraisers can see through any clutter, so don’t worry if your house is not spick and span. But keep in mind that a few easy updates here and there can significantly elevate the appraised value of your home. Investing some effort into renovating may pay off generously for you.
You can:
- make minor repairs
- improve curb appeal with landscaping
- invest in high-ROI projects
Collect documentation
To ensure you are prepared, it is vital to have evidence of any home improvements that have been made in the past. This documentation can include remodels and upgrades, all the way to new additions.
Review the report
In the “Reconciliation” section of your appraisal report, you’ll likely find an accurate assessment of your home’s value.
If you are unhappy with the appraisal results, you can submit a reconsideration of value.
Conclusion
In an ideal situation, you can sell your home, use the equity as a down payment, and find that perfect new house in no time.
Unfortunately, in reality, the process of selling and buying a house at the same time is only sometimes straightforward. More often than not, you will encounter some level of overlap throughout this journey.
When making your decision, there’s a lot to consider – including the available time and state of your finances. Plus, it pays off to research the housing market near your home. Ultimately, all these things help determine which solution is best for you.
Consider all factors before choosing, from advantages to disadvantages and associated expenses. Spend time understanding the whole picture to make an informed selection that satisfies your needs.
