This is one of the most popular real estate questions: Should I sell my current home before buying a new one?
And while there is no magic answer, there are many things you can do to mitigate your risks when choosing to buy and sell homes in unison. As with many challenges, your greatest success rate often depends on your level of preparedness.
One of the most important factors to consider is your financial position to assess whether a simultaneous purchase and sale is even feasible. Owning two properties at the same time is the safest option, but not entirely realistic for everyone. Knowing what you can afford, taking inventory of the equity in your current home, and looking into the types of loan products available with your mortgage agent is a great first step.
For most people, the proceeds from the sale of your current home are required to purchase a new home. If this is the case, there are a few options your agent can discuss with you to determine what works best.
One popular option is a bridge loan. As the name suggests, this type of financing acts as a bridge between the two homes. This is a short-term loan, usually lasting no more than six months, and can be an attractive option as it allows you to sell your existing home and buy a new one without restrictions or contingencies.
Your local housing market
Another key area to evaluate is your local housing market. This will help you determine the length of time it may take to buy one house and sell the other based on markets being favourable to either buyers or sellers (eg, in a buyer’s market, it’ll be easier to buy a new home and vice versa in a seller’s market). By examining how quickly homes are selling and at what price point, you’ll gain a better perspective of your potential timelines, and determine how much you can expect to get for your current home as well as what you’ll have to pay out to buy a new one. Before you start seriously searching for a new home, or put your current home on the market, make sure you have a comprehensive understanding of both housing markets, if they’re different.
Timing plays a crucial role when buying and selling simultaneously. While the odds of two homes closing on the exact same day are slim, there are factors to consider to help ensure they occur as close together as possible. It can take a few days for your lender to transfer the funds, so ask for closings to take place early in the week and early in the morning, and aim for closings within two or three days of each other. In order to secure your preferred closing dates and times, you may want to consider offering some flexibility in other areas of your contract to offset this request.
As with any real estate transaction, you want to work with a team of qualified professionals. For instance, your appraiser will help determine your home’s resale value, your real estate agent will help with timing and the negotiation process (if possible, you should try and work with the same real estate agent for both transactions) and your mortgage agent will assist with the loan and mortgage process for both homes.
Have questions about buying and selling at the same time? Answers are a call or email away!