Selling your home while buying another at the same time can be quite the balancing act. It can be difficult to time both transactions perfectly so you’re not responsible for two mortgages or forced to find temporary lodging. There are three options for the selling and buying process. Each has pros and cons and can be the “right” answer for different situations. Let’s take a look at them:
Selling Your Home First
Many homeowners believe that selling their current home first is the safest way to avoid having to carry two mortgages. There are pros and cons of selling the existing home first:
- Pro: You’ll know your exact financial position when buying the new home due to the completed sale of your first home.
- Pro: The mortgage approval process for the new home may be simpler as the old home has been paid in full. There is no need for temporary financing.
- Pro: You may be in a stronger negotiating position when selling your home. It can be tempting to accept a low offer when facing a deadline.
- Con: There is a risk that you and your family will need to find temporary housing, or enter into a rental agreement with the home’s new owner until you find a new home.
Selling your home first may be the right choice if the financial implications of carrying two mortgages are a major concern.
Buying a New Home First
Buying a new home prior to selling your home eliminates the risk of needing temporary housing. Pros and cons of this method include:
- Pro: You are able to move into your new home at your own pace and can take time to get your existing home ready for sale.
- Pro: Your new home search can be done at a timeline that is defined by you and not the need to coordinate both sales.
- Con: Depending on how long it takes your home to sell, you can be responsible for two mortgages which may cause a financial burden.
- Con: You are responsible for the upkeep on your existing home while it is vacant.
This method of buying and selling works best when the existing home is paid for, eliminating the potential financial concerns. Alternatively, this method also allows homeowners to rent their existing home. This may be done for income, to cover the mortgage payment or to delay selling until the market is ideal for selling the first home.
Buying and Selling At the Same Time
In this scenario, timing is key. You must be flexible and prepared for things to fall out of sync. It is also important to understand that if either deal falls through, you may be forced to deal with one of the scenarios mentioned above.
- Pro: When done correctly, you can move out of your home and into your new home seamlessly.
- Con: There may be a need for short term special financing to bridge the gap between closing on your existing home and your new home. It may be difficult to obtain this financing as it can be risky due to the lender.
- Con: You may be in a weaker position to negotiate due to your need to adhere to a schedule.
Understand Your Options – Get Advice
Selling your home while buying a new home can be difficult. Understanding your options and speaking with a real estate agent puts you in the best situation to negotiate both transactions for your optimal benefit. Schedule a consultation with one of our agents today: