Strategies for Purchasing a Fresh Residence Prior to Selling the Existing One
Buying a dream home before selling your current one can be tempting, but walking this tightrope can be tricky. Here are some tips to help you master the delicate dance.
Can I buy first, then sell?
Absolutely! However, it's a balancing act that requires strategic planning. An experienced local real estate agent, familiar with your area's market intricacies, can help manipulate the transaction timeline to your advantage.
Adding contingencies to your contract is another strategy. A sale contingency ensures that your new home purchase is contingent on the sale of your current home. If the contingency isn't met within the set time frame, the deal could fall apart. Keep in mind, in a competitive market, sellers may favor non-contingent offers, leaving you at a disadvantage.
Working the system
- Negotiate a delayed closing: If the sellers of your new home agree, pushing the closing date slightly could better align your home sale with your new home purchase.
- Rent-back agreement: In such agreements, the buyer agrees to rent the property back to the seller for a predetermined period. The seller can stay temporarily, paying rent to the new owner, while preparing to move.
- Bridge loan: A bridge loan bridges the gap between purchasing a new home and selling your old one. With this loan, you can make an offer without relying on the sale of your current house, appealing to sellers who want prompt transactions.
Weighing the pros and cons
Buying a house before selling comes with advantages and disadvantages.
Pros:- Housing Security: By selling quickly, you secure a roof over your head.- Less Hassle: Using temporary housing or moving twice is avoided, and so are the costs associated with it.- Speed: With a home ready and waiting, you can make speedy offers, beating out competitors who need to sell first.- Stress-Free Showings: If you've already moved out, you eliminate the worry of keeping your home show-ready and disrupting your life for showings.
Cons:- Financial Strain: Managing two mortgage payments and the expenses of running two households can stretch your budget thin.- Draining Savings: If the sale of your existing home takes longer than anticipated, or you don't get the price you hoped for, your savings could dwindle.
Alternatives
Real estate attorney Christa Kenin, who also serves as an agent with Douglas Elliman, advises sellers to consider selling their first home before purchasing a second one, unless they're financially prepared to carry two houses or can sell their current home quickly without losing profit.
Companies like Flyhomes, Orchard, and Knock specialize in helping buyers purchase homes before selling their current ones. Renting your previous home and selling it later or working with an iBuyer are other options to explore.
- In some cases, it could be advantageous to sell your current home before purchasing a new one, especially if you're financially able to carry two mortgage payments or sell your property quickly without incurring significant losses.
- Bridge loans, rent-back agreements, and negotiating a delayed closing are strategies that can help manage the transaction timeline when buying a house before selling, but they should be approached with careful consideration as they may come with additional costs and complexity.
