How To Buy And Sell Houses At The Same Time

Have you ever tried to coordinate two major life events at once? In many cases, homeowners find themselves in a situation where they must move out of their current home while they're buying another.

Luckily, you can learn how to buy and sell houses at the same time, and believe it or not, it doesn't have to be as complicated as it sounds. Our guide will help you dive into some steps to conquer buying and selling at the same time.

Is Buying And Selling Houses At The Same Time Possible?

Yes, it's possible to buy and sell homes at the same time. You can tap into three major options as a homeowner: sell your house first, buy a new one first or buy and sell at the same time.

At first glance, there are immediate benefits and drawbacks to each situation. However, every person's life is different, and each scenario warrants careful consideration.

Should You Buy A New House Or Sell Your Current One First?

It's a good idea to write down the pros and cons to decide whether buying a new house or selling your current house makes the most sense for you. We'll walk through each circumstance's general pros and cons, though you may have a few you may have in mind for your particular situation. 

Pros Of Selling A House Before Buying A New One

The benefits of selling a house before buying a new one may include the following:

• One mortgage: The most obvious benefit of selling a house before buying a new one is that you won’t have to pay two mortgages.
• Gives you a financial cushion: You can use the money from your home sale toward buying a new house. The money from the sale can go toward a down payment or closing costs. The amount of money you put down for a down payment depends on the type of mortgage you choose. Lenders typically require at least 3% on average for a conventional loan. Closing costs typically cost 3% - 6% of the home's purchase price.
• Easier qualifying: You may have an easier time qualifying for a new mortgage because the lender will see that you have sold your current home, reducing your monthly debt payments, and have more assets at your disposal from the sale.

Cons Of Selling A House Before Buying A New One

Now, the downsides of selling a house before buying a new one:

• May have to rent: You may have to find a short-term rental in the time between selling and buying. In some situations, you may be able to rent back the home you sold from the buyer for a short time. If not, you may have to rent a condo or apartment and may even have to pay to store some of your belongings until you find your next home. You may get lucky and avoid this step if you have family or friends who will let you stay with them.
• May have to move: You may have to move before finding a new house, which can double your moving costs and efforts. If you sell your house before you find a new one and you plan to move across the country, you may have to hire a moving truck twice – once for a new apartment and then again for the new house once you find it.
• Rush to buy: You might feel rushed to find a new house if you don't have anywhere to go after you sell. Homeowners might rush through a home purchase and potentially worry that they aren't getting their "ideal" home.

Pros Of Buying A New House Before Selling Your Current One

Buying a new house before selling your current home may have benefits, including:

• Peace of mind: You have peace of mind knowing you have somewhere to live after selling your house. You won't have to crash on your neighbor's couch while you look for a new place to live.
• No rental needed: Buying a house before selling your current home means you don’t have to pay for a short-term rental, such as an apartment or condo.
• Gives you more time to sell: Searching for the right buyer and waiting for the right offer to come along means a lot in the real estate game. Buying before selling gives you more time to sell your house.
• Can move in slowly: You can also take your time moving if you buy before selling your current home – you may choose to take several months to move into the new house if you have the luxury to do so.

Cons Of Buying A New House Before Selling Your Current One

The downsides of buying a house before selling include:

• Two mortgage payments: Paying on two houses can decimate your savings and increase stress, especially if your old house doesn't sell as quickly as you planned.
• Higher debt-to-income ratio (DTI): Two mortgages may increase your debt-to-income ratio (DTI) and lead to a higher interest rate on your new mortgage. Your DTI compares your monthly debt to your gross monthly income. The lower your DTI, the less debt you have in relation to the income you bring into your household each month. The higher your DTI, the less favorable it looks to a lender. Lenders typically look for a DTI of around 50% or less, which might be challenging to achieve when you have two mortgages.
• You won’t have proceeds from selling your home: If you buy another house before selling your current home, you won’t have the proceeds from selling your current home to put towards your new home.

How To Buy And Sell Homes At The Same Time In 9 Steps

So, how do you buy and sell homes at the same time? Check out the following steps to learn how.

1. Understand The Current Market

First, evaluate current housing market trends to help determine the best time to sell your house or whether it’s a good time to buy.

Understanding the housing market you're interested in will help ensure that you don't miss out on a home you truly love because you waited too long to put an offer in during a seller's market.

If you're considering selling your home first, know how much the homes in your neighborhood have been selling for. You can attend a few open houses to see what home values are like around you.

Ultimately, your real estate agent will be your most valuable resource throughout the process to help you learn how much comparable homes sell for and how long they've been on the market to help you decide whether to buy or sell first.

2. Evaluate Your Finances

Once you understand the market, consult with your mortgage lender to learn whether you can take on a second mortgage or need your home sale proceeds to go toward a down payment on a new house. Figuring out how much you can afford will help you set realistic expectations about pricing your home and making an offer.

3. Find A Real Estate Agent

Finding a real estate agent can help you buy and sell houses at the same time. Ask for referrals from friends, colleagues and family members – anyone you know and trust who they used for their move. If you plan to move out of state, you can also contact a local agent about finding a new agent in the area where you plan to move.

Check local home listings showing real estate agent names, then search those same names on online reviews to determine their track record in working with clients. You can also ask your chamber of commerce or other referral services or attend local open houses to meet experienced agents.

4. Get Your House Ready To Sell

Next, learn how to get your house ready to sell. Getting a house ready to sell takes a multi-pronged approach, including making necessary repairs, such as fixing a cracked window or repairing a hole in the deck. Think bigger picture – if you know the roof is due for a replacement or the HVAC system is on the fritz, get those repairs done ahead of time. They may cause issues when the home inspector shows up. Ensure you're not hiding any problems, however. If you're not honest about the less-than-wonderful aspects of your home, a sale could fall through later.

Spiff up the interior of your home, staging as much of it as you can. Ensure that the curb appeal is also on point – splurge on mulch and add festive flowers to the porch, for example.

5. Prepare Your Down Payment

As mentioned above, the amount of money you put down on a house varies. You may have heard that you "should" put down 20%, but that's not required. Putting down less than 20% will likely require you to pay private mortgage insurance (PMI), which protects your lender if you don't put 20% down. However, when saving for a down payment on a house, note that you can put as little as 3% down for a conventional loan, and some government-backed loans, such as VA loans and USDA loans, don't require a down payment at all.

Create a budget and save for a house or use your home sale proceeds toward a down payment on your new house.

6. Arrange Financing

Arrange financing for your new home and choose a mortgage and lender that works for you. The types of mortgages that may be ideal when buying and selling a home at the same time can include a bridge loan, home equity loan or a home equity line of credit (HELOC):

• Bridge loan: A bridge loan is a short-term loan commonly used by people who plan to buy and sell a house quickly. They have high interest rates and use your home as collateral. However, they cover the closing costs of purchasing a new home as you pay on your original mortgage loan. You can put an offer in without a sale contingency (meaning that as the buyer, the sale is contingent upon selling your original home first). Not having a sale contingency can make your offer look more attractive to a seller. Our sister company Rocket Mortgage^® doesn't offer bridge loans at this time.
• Home equity loan: A home equity loan is a type of home loan that allows you to borrow against the equity in your home. Equity refers to the amount of your home loan paid off rather than the amount you owe. A home equity loan, also known as a second mortgage, can help tide you over by giving you extra cash, which can be helpful if you have two mortgages or mortgage and rent. You may need at least 20% of equity in your home to qualify, and you must put your home up as collateral for the loan. A home equity loan is typically paid back with interest over 10 – 30 years, which you'll pay back in equal installments.
• Home equity line of credit: A home equity line of credit offers an opportunity for homeowners to borrow against their home equity, just like home equity loans. However, they work as revolving credit, like credit cards, which means you can withdraw money up to a certain credit limit over a certain length of time – typically 10 years. Once this draw period ends, you make monthly payments on the HELOC. A HELOC can also help you with expenses while you buy and sell your home. Note that our friends at Rocket Mortgage do not offer HELOCs at this time.

7. Put Your House On The Market

Put your home on the market with a listing agent, or seller's agent. A listing agent helps you sell your home by:

• Coming up with an asking price
• Staging your home
• Marketing your property on the multiple listing service (MLS), an online interconnected web for real estate agents

Listing agents will bring you buyers and offers on the property. Once someone makes an offer, your real estate agent will help you navigate all the next steps to close on the house.

8. Get Approved

Next, mortgage approval will occur. It's always a good idea to get preapproval, when your lender looks at income, credit, and assets through W-2s, tax returns, pay stubs, bank account information and a credit check. You can think of a mortgage approval, on the other hand, as a final "seal of approval." If you meet the conditional approval conditions, you'll get to the "clear to close" stage.

9. Negotiate Terms

Negotiate as a buyer or seller to better fit your moving timeline. You can negotiate a home sale contingency when buying a house, which means your offer depends on your home selling. Keep in mind that a home sale contingency may seem less desirable in a competitive seller's market, because a seller may have their pick of buyers without home sale contingencies. However, if a home seller has not received much interest in the property, they may be satisfied with a contingency offer.

You can also ask your agent to arrange a rent-back agreement, when your lender and buyers agree to let you stay in your home for an additional 60 – 90 days. You may exchange a lower listing price or rent directly from the home buyers, giving you a little time to find the right home. Be sure to speak with your lender to discuss the potential need for rental insurance during the rent-back period.

It usually takes 30 – 45 days to close on a home, from the loan application to closing. However, you may move the closing date. Moving a closing date could mean the buyer will pay daily interest charges, pay the seller a penalty or compensate for extra tax, insurance and mortgage payments.

Tips For Buying And Selling Houses Simultaneously

Check out some of our tips for buying and selling a house at the same time.

• Consider renting out your current home: Renting out your home can be a smart alternative to buying and selling homes at the same time. It will reduce the amount you'll have to pay out of pocket for at least one of your mortgages.
• Be strategic with home pricing: Set the right asking price when buying and selling homes at the same time. Your listing agent should get a comparative market analysis of other homes recently sold near you. Also consider the time of year, competition in the neighborhood and whether it's a buyer's or seller's market. All of those factors can help you set a price for your home. Setting the wrong price in the wrong market may affect how quickly it sells.
• Be Ready To Move: Pack as much of your belongings as early as you can in preparation for your move. Timelines can be tight when buying and selling property. If you need the assistance of movers, get an estimate early so you can anticipate costs.
• Try staying with friends or family: Staying with friends and family when buying and selling houses at the same time may keep you from having to pay rent or lock into a lease while you're looking for the right home.
• Look into selling to an iBuyer: iBuyers, also called instant buyers, is a real estate company that uses software to look at your home and the housing market in your area to give you an offer on your home so you don't have to list your home for sale. An iBuyer can offer you a great opportunity if you need to buy and resell quickly or buy and sell a house at the same time.

The Bottom Line

As a home seller, you can usually go one of three ways: sell your house first, buy a new one first or buy and sell at the same time. Each option has pros and cons.

Buying and selling a house at the same time requires following a few specific steps, including understanding the current market, evaluating your finances, finding a real estate agent, getting your house ready to sell, preparing for a down payment, arranging financing, putting your house on the market, getting approved and negotiating terms.

Ready to buy and sell simultaneously? Get approved with Rocket Mortgage to start your journey.