When buying and selling a home, intending to close the deal concurrently can be a bit risky, and potentially unnerving in any market. The timing between selling and buying a home won’t always align exactly as you want. Therefore, having an idea of what to expect may help you make an informed decision. Here are three tips for both buying and selling first.
Buying the New Home First
Buying a house before selling the old one is more difficult. However, that doesn't mean it's impossible, only that it requires more financial wrangling. Sometimes there comes a time when you happen to find your dream home before selling your current one. If that happens, here are some options for what you can do:
1) Get a Bridge Loan
Buying a house before selling means you can be financially strapped. Getting a bridge loan will help you get some additional finances before selling your old one. Bridge loans are typically short-term loans that will help you to pay the new mortgage. Then, once you sell your old home, you use the proceeds to clear the bridge loan. However, bridge loans can be considered a gamble, as they do come with higher interest rates and strict terms.
2) Include a Home Sale Contingency
Using a home sale contingency is an alternative option you can use to deal with this scenario. The contingency will give you a grace period to find a buyer for your old home before settling on your new house. You will be in a position to be able to back out of the deal or extend the contract in case you don't get a buyer in time. This has less financial risk but is at the discretion of the seller.
3) Hold the Two Properties
Keeping the two properties for a while will undoubtedly stretch your finances. However, if you can afford to hold them, it can be the safest option for you. This means you can submit offers for the new home without worrying about a bridge loan time frame or using a home sale contingency.
Selling Home First
Selling the old property before buying a new one is a more financially secure option. It gives you a clue on how much money you'll be able to spend on the new home. However, this option has some drawbacks. For example, you will most likely have to relocate to a temporary residence before being able to move into your new home. If you are in such a situation, here are some options of what you can do:
1) Use the Settlement Contingency
To avoid the hassle of relocating twice, you could use the settlement contingency to your advantage. The moment you put your old home on the market, ensure you start searching for a place to buy. If possible, ensure the settlement day for your old home falls on the same date as the buying of your new house to ensure that you can move to your new home the same day you sell the old property.
2) Sign for a Rent-Back Contingency
This provision helps you rent back your home from the buyer of your current home until you get ready to move to the new house. However, in this situation, you're essentially asking the buyer for a favor. So, the buyer might not agree to it.
3) Get a Short-Term Rental
Life happens, and if all else fails, you can plan to get a temporary rental house until you buy a home. However, short-term rentals can be expensive and you may have to get an additional storage facility to accommodate your belongings until you purchase a new home.
There is no doubt that buying and selling a home at the same time can be daunting. However, by working together with your realtor, and deciding on which path to take, you will have a much smoother experience.
The Michael Stoltzfus Group is located in Lancaster, PA and serves the Lancaster County and Central Pennsylvania area. We work diligently to help home buyers and sellers like yourself achieve their home goals. With extensive experience and knowledge of the area, the real estate team at Michael Stoltzfus Group will provide friendly and professional support for your entire real estate transaction.
Contact us online where one of our professional team members will respond via email or call us today at 717-380-3367.