It’s true: Selling and purchasing a house simultaneously can be difficult at best. At worst, it’s a complicated task that comes with some risk. It’s not uncommon. According to the National Association of Realtors 71% of repeat homebuyers had their former residences. This means that it is highly probable that some of them double-dutyed as buyers and sellers.
You could reach the perfect timing “sweet spot” and sell your house, then release equity for a downpayment, and then search for your next dream home in the same order. There will likely be overlap.
This guide will cover common problems you might face, possible solutions, and ways to keep your sanity at all times.
But why does simultaneous buy-sell get a bad reputation? Here are some common obstacles that make it hard to handle both transactions simultaneously:
It might not be possible to save enough money to pay down your home equity, so it is difficult to raise the funds. According to statistics, the U.S. homeowner’s equity increased from $6.16 trillion in 2010 to $18.72 trillion between 2010 and 2019.
Travis Steinemann, property investor at BuyHousesBR, says that there are several options. These options come with costs and might not work for everyone.
He also pointed out another possible problem: A homeowner with an FHA loan or VA loan is limited to one mortgage loan per year. This means they won’t be allowed to get a mortgage for another property.
The buying and selling of a home can be complicated. There are many details and decisions that must be made.
Mike Qui, founder of Good as Sold Homes Buyers, stated that logistics include timing the purchase and sale, negotiation with both sides regarding moving or possession dates, organizing belongings and getting ready for the move. A good agent can take the stress out of homeowners by assisting them with this process.
Many homeowners make an offer for a new house that is contingent on selling their existing home to reduce their risk. This scenario could lead to your offer being rejected and replaced by a non-contingent one. Erik Jacobs, a real-estate attorney at Cicero France Barch & Alexander P.C., says that if this happens, you will need to decide if you want to remove the contingency. This is risky and may not be financially feasible.
Caleb Liu of House Simply Sold points out that there are many situations in which both the seller and buyer are trying to buy or sell simultaneously. This creates what he refers to as a “daisy-chain effect.” There are more moving parts and more parties involved so there is more chance for the deal to fail.
Liu says that she spoke to a Realtor and learned that her most bizarre transaction involved seven people in a daisy chain. This included their title companies, inspectors, realtors, contractors, title companies, inspectors, contractors, and title companies. Each of these potential transactions had its own set of contracts and contingencies. Each of these deals could fall apart, triggering a domino effect for the other parties.
You’ve found the perfect home and it’s right for you. However, your home isn’t yet sold or isn’t even on the market. Despite the limitations, you may decide that you can’t miss the opportunity to own a unique or special property.
Anna Paduhovich, a top real estate agent from Virginia Beach, used to see most of her clients sell their homes before they bought. But with the advent of COVID-19 she has noticed a shift.
Paduhovich says that this could be because more people work from home, some permanently, and are finding they require more space. Perhaps homeowners realize they don’t like the neighborhood or their surroundings after so many years of being at home and want to make changes without waiting for a sale.
Here are some tips to help you navigate the buying-while selling process without putting too much stress on yourself.
Steinemann suggests that you should look at your cash reserves as well as your monthly disposable income. These are the key questions to ask yourself:
Are you able to afford both mortgages?
What financial runway are you able to maintain before you can’t make both payments?
Are you able to put aside enough assets for a down payment?
What amount do you have left for your down payment after taking into account the cost of both mortgages in worst-case scenarios?
Steinemann says that if you live paycheck to paycheck, then this option may not be for you. This option is possible if you have a stable income and low monthly debts.