Whether relocating down the block or across the country, there is a lot of work and planning that goes into moving. For current homeowners, there may be more logistics when simultaneously buying and selling houses.
If you’re figuring out how to sell and buy a house at the same time, there are some options to choose from based on your own budget, situation, and tolerance for risk.
Although this situation can be complex, it is not uncommon. In fact, 74% of home buyers owned their previous residence.
To help you navigate this juggling act, this guide will go over potential challenges and outline some alternative options and tips to close on both deals.
Evaluating the Local Housing Market
Taking stock of the local housing market can help inform how to sell and buy a house at the same time. Not only does the market influence home prices, it can also impact the length of closing on a sale or purchase.
You may be faced with a housing market that favors buyers over sellers or vice-versa. Researching your local housing market ahead of time can help guide your efforts in finding a new house.
When It’s a Buyer’s Market
A buyer’s market has more houses for sale than people actively looking to purchase a home. Generally, finding a new house in areas with a higher concentration of sellers can be easier than selling. At the same time, an accurate listing price and contingencies can factor into the equation.
Since there is less competition in the market, buyers can consider requesting an extended closing to allow time to sell their own house or include other contingencies in their offer. For instance, a home sale contingency can be included in a contract to coordinate a purchase with the sale of the buyer’s house.
A home sale contingency asks for the patience of a seller depending on their situation. Complications may arise in the event that all parties involved are simultaneously buying and selling homes.
On the flipside, sellers in a buyer’s market could benefit from setting a competitive asking price and getting ahead of inspection by buttoning up any lingering home maintenance issues.
💡 Quick Tip: SoFi’s new Lock and Look* feature allows you to lock in a low mortgage financing rate for up to 90 days while you search for the perfect place to call home.
When It’s a Seller’s Market
If there are more buyers in the housing market than there are homes for sale, it’s considered a seller’s market. Often, selling a house where there’s a high percentage of homebuyers takes less time and can fetch a higher price.
Sellers may be able to take advantage of the housing scarcity and go with a more ambitious asking price. If this pays off, the extra cash could be especially useful if you are shopping for houses in a seller’s market yourself. Making a competitive offer may be helpful if you are trying to beat out other bids and quickly secure a home.
It’s also not uncommon for houses to receive multiple offers in a seller’s market. If this is the case, sellers may have more success negotiating favorable terms that suit their sell and buy situation.
For example, a rent-back agreement allows sellers to lease their former house from the new owners for a set period of time. This gives them more time to find their new home, but may not be an acceptable condition for every prospective buyer.
Recommended: How Does Housing Inventory Affect Buyers & Sellers?
Calculating Home Equity
Getting your finances in order to buy and sell a home isn’t just about counting savings and building budgets. Home equity is another important consideration.
To calculate home equity, subtract the money owed on a mortgage loan from the current market value of a house. For example, if your home is worth $250,000 and you still owe $150,000 on your mortgage loan, you have $100,000 of equity in your home.
Depending on your financial situation, home equity may be necessary to buy a new home. Keep in mind that equity does not become available until the closing is complete. Typically, lenders will limit borrowers to 80% to 90% of their available equity, depending on factors such as credit history and income, among others.
Unless you’re selling a home shortly after buying it, the market value of a home could likely differ from the initial purchase price. These changes could either increase or decrease your home equity.
Generally speaking, the average home sale price in the United States increases year-to-year, barring notable exceptions like the 2008 financial crisis and subsequent recession. Yet, these trends don’t account for regional housing booms and busts.
Getting an official valuation from a real estate appraiser, which typically costs between $300 and $400, is one way to get a more accurate idea of your home equity and a feasible sale price. Researching comparable homes that recently sold in your community can give you a ballpark estimate, too.
💡 Quick Tip: You can use money you get with a cash-out refi for any purpose, including home renovations, consolidating other high-interest debts, funding a child’s education, or buying another property.
Prequalification vs Preapproval
Being aware of your own financial situation is useful for a variety of reasons, especially when buying a house. But if you’re among the majority of buyers who finance their home purchase, your mortgage lender will consider factors besides your own number crunching and goals when deciding their loan total.
For many prospective homebuyers, prequalifying is the first step to getting an estimate of how large a loan they would likely qualify for. Lenders generally evaluate factors like a buyer’s debt, assets, and income, which may take just a matter of days.
Becoming prequalified does not lock buyers into a set mortgage rate. Rather, it gives buyers a more accurate picture of their financing options and what houses are in their price range. Before making an offer, it is generally advisable that buyers are prequalified, which can be demonstrated with a letter from your lender. This can signal to the sellers that you are a serious buyer.
To ultimately obtain a mortgage loan, buyers still need to go through preapproval. In doing so, lenders perform a more thorough credit and financial background check to arrive at a specified preapproved loan amount.
Sellers may consider offers from preapproved buyers to be more favorable than those with just prequalification since there is less concern about a rejected mortgage application pending a deal. It may also get you to the closing table faster, which can be a big plus if you’re in a competitive market.
Selling Before Buying
Whether by intention or pure circumstance, you could face a choice of selling your house before buying your next home.
Selling first can potentially be beneficial for qualifying for a mortgage loan. After the sale closes, you may be able to use that money to finance a down payment on a new home, as well as having a lower debt-to-income ratio.
Yet, selling before buying may create complications for finding a place to stay until you purchase a new home. If the new buyers are not willing or able to do a rent-back agreement, you may end up having to find temporary housing in the meantime.
Apartments and rental properties may require signing up to a 12-month lease. For prospective homebuyers, a lengthy rental commitment with penalties for leaving early may be costly. Instead, finding a month-to-month rental option can grant more flexibility and sync up with a storage unit lease, if needed.
Buying Before Selling
When you find your dream home, you may want to pull the trigger and make an offer right away. But what does that mean if your house hasn’t sold yet?
If your budget allows you to buy a home with cash vs. a mortgage, you may be in a position to move forward with the offer.
For some, making a down payment or home purchase before selling with savings alone is not feasible. In other cases, your debt-to-income ratio and credit may prevent you from getting a second mortgage.
There are several options available if this is the case. A Home Equity Line of Credit (HELOC) can let prospective buyers borrow against the equity of their current home. A buyer’s credit and existing home equity are taken into account to qualify for a HELOC.
If approved, buyers can use the HELOC to access money for a down payment, which could then be paid off when their house sells. Take note of the repayment terms and interest rate on the HELOC, as these can vary from lender to lender.
Taking out a bridge loan is another possibility. These short-term loans are usually structured to cover a down payment and become due after several months. Bridge loans generally have high interest rates and may require an origination fee. Sellers who cannot unload their house in time may need to request an extension or begin repaying the loan while still paying their mortgage.
Choosing a Real Estate Agent
A savvy real estate agent can help reduce the stress and uncertainty of selling and buying a house at the same time. Their expertise can come in handy for setting an accurate listing price, scheduling showings, and staging a home.
If you had a positive experience with the agent you worked with to buy your home, their familiarity with your property could help expedite the process and give you peace of mind in case you have to move out of the area before selling.
There are benefits to using the same agent for buying and selling when geography allows. For instance, they can simplify the lines of communication and more easily coordinate the closing of both homes with your ideal timeline.
Sometimes it may not be possible to use the same realtor. The obvious case is when you’re moving a significant distance to a new area.
The need to use two realtors could arise if you’ve chosen a reputable realtor who exclusively works with buyers or sellers alone. If you decide to hire such a realtor, they may be able to recommend a trusted colleague in their agency to handle your other deal.
Timing Your Closing Dates
There is a lot to consider when selling and buying a house at the same time. The timing of both deals can impact financing options, having to find temporary housing, and figuring out how to store or move your belongings.
Setting a closing date is part of the negotiating process for any real estate deal, and coordinating closings for the same date can streamline the process.
Still, closings can be delayed due to reasons outside your control. Having a back-up plan, such as a rent-back agreement, can keep you in your home while you find a new house. Putting additional contingencies in a contract can help with rescheduling closings as needed or even walking away without much financial loss.
Obtaining a Mortgage
Buying and selling houses at once may not always be easy, but it is doable.
If you cannot purchase a house with cash or home equity, you’ll need to figure out how much you can borrow.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
*Terms and conditions apply. Applies to conventional purchase loans only. Rate will lock for 90 calendar days at the time of pre-approval subject to payment on 60th day of the fee below. If you submit a fully executed purchase contract within 30 days of the initial rate lock, SoFi will reduce the interest rate by an additional 0.125% at no cost. If current market pricing has improved by .75 percentage points or more from the original locked rate, you may qualify for an additional rate reduction. If you have not submitted a fully executed purchase contract within 60 days of your initial rate lock, you will be charged $250 to maintain the rate lock through the 90-day period. The $250 fee will be credited back to you at the time of closing. SoFi reserves the right to change or terminate this offer at any time with or without notice to you.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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