Thinking about buying a new home while selling your current one? It’s a significant step that requires thoughtful planning and smart decision-making. Here’s a breakdown of three key options for managing the buying and selling process, each with its own set of pros and cons to help you find the right fit for your situation.
1. The Contingent Offer: Buying First, Selling Later
One option to consider is making a contingent offer, where your purchase is dependent on the sale of your current home. This approach allows you to begin house-hunting sooner, but it comes with challenges:
Living in the Home During Showings: This means keeping your space in show-ready condition, which can be especially challenging if you have family photos, personal belongings, and day-to-day clutter. Removing items that make the home feel too personal is key to helping potential buyers envision it as their own.
Navigating the “Bump” Stage: With a contingent offer, you’re in a bumpable position, meaning a non-contingent offer from another buyer could take precedence. This can be tough if you find a home you love but lose it due to the contingent status.
Timing is Key: To minimize risk, it’s often best to wait until your home sale is at least pending and has passed inspections before starting your search for a new property.
Contingent offers are viable but can be stressful, particularly in competitive markets. If you’re able to navigate these challenges, it’s an option worth considering.
2. Buy First, Sell Later: Leveraging Equity
Many homeowners have equity in their current property, making it possible to purchase a new home before selling the old one. Working with a knowledgeable lender can help determine your options for using this equity, such as a home equity line of credit or a bridge loan. However, this path has its considerations:
Financial Stability: You’ll need to manage two mortgages simultaneously, which can be daunting. Carefully penciling out your expenses and financial obligations is crucial, as what looks manageable on paper can feel significantly more stressful in practice.
Preparation for Selling: Moving into your new home first allows you to prepare your previous home for sale at your own pace. With no need to keep it “lived-in” ready, you can focus on staging, repairs, and improvements that can attract buyers and potentially increase the home’s value.
While this option can be rewarding, especially if you’re looking to take time to find the right buyer, it’s essential to prepare for the financial pressures and logistical demands of holding two properties.
3. Rent or Stay with Family: Allowing More Time to Buy and Sell
For those seeking more flexibility, renting temporarily or staying with family can offer a more relaxed approach. However, there are trade-offs to consider:
Renting: This gives you the advantage of taking your time to find the perfect new home without the pressure of aligning your move with the sale of your current property. However, rental costs can be high, and rental contracts often require a 12-month commitment. If you find a new home sooner than expected, breaking the lease can lead to additional expenses, which may include penalties and moving costs.
Staying with Family: Living with family allows you to save on rental expenses and dedicate more time and resources to finding the ideal home. However, adjusting to someone else’s lifestyle can be challenging, particularly if you’re accustomed to living independently.
Regardless of the option chosen, a well-planned approach is essential. Having a backup plan, engaging with knowledgeable professionals like a real estate lender, and consulting with your CPA if needed can all contribute to a smoother experience.
Each of these options has benefits and drawbacks, and the best choice ultimately depends on your unique circumstances, financial situation, and comfort level with potential stresses.
Join Shey and Angela in this week’s market update video to learn more!