The Ultimate Real Estate Balancing Act

How to Buy a House While Selling Your Own

For Sale Sign

We all hear the news about the real estate market – inventory remains at historic lows making buying a new home difficult for buyers.  What happens when you currently own your home but want to buy a new one?  This can be a challenge as many homeowners are reluctant to put their homes on the market without knowing where they are going to go, but once they find their perfect new home have to figure out how to balance buying the new one while selling their current home.

You do have options if you want to move but are hesitant to sell before you buy your new home.  It is important that you have a plan going into the process.  Below are some tips to help you with this process.

The Pre-work

Going in, it is important that you have all of your ducks in a row.  To get started, you should first:

  • Step One: Contact a Realtor –  The Zahn Group frequently works with sellers who want to be able to move quickly once they find their new home, so we have a process in place to help you get ready.  We will provide a market analysis of your home so that you have an idea of what price you might expect to get when you sell and what your proceeds might be for your new home.  We also provide recommendations for things you could do to help your home sell more quickly (and we can even provide contractor info and assist you in getting quotes from reputable venders for the work).
  • Step Two: Prepare Your Current Home – Once you have decided what items you are going to repair and/or upgrade, it is time to get to work.  Having these items completed will allow you to put your home on the market quickly when the time comes.
  • Step Three: Get Pre-approved – talk to your lender and find out what your buying options are.  Do you need to close on your current home to be able to buy?  Can you get approved without selling your current home?  Are there options to help you bridge the gap?  These are important considerations going into the process when you are looking to buy and sell.  Your lender can lay out your options and provide pre-approval letters so that you are ready to go and can make informed buying decisions.  The Zahn Group can recommend savvy lenders that can help you through this step. 
  • Step Four: Start Searching – finally, it is time to start searching for your new home.  The Zahn Group can set you up on a portal based on your specific criteria (house features, size, location, price, etc.), and you can get new listings delivered straight to your inbox!  You can even see listings that are coming soon, so you can make plans to be the first to get in the home when it goes active. A low inventory real estate market time can be your enemy, so it is important to know when homes hit the market.

The Buying and Selling Process

You have found your new home; here is where the rubber meets the road.  It is time to figure out how you are going to buy and sell.  There are several scenarios to consider:

  • Scenario 1: Buying Before Selling  This option gives you the most flexibility without having to move twice.  We can even structure your new loan to recast once your current home closes so you can ultimately still use the equity in your current home to purchase and lower your overall monthly payments. 
  •  If you qualify to carry both homes, this is an option that would allow you to put in your offer on the new home and then list your home for sale.  You may have 2 different closing dates, or you may be able to line up the closings back to back (depending on timelines).  In this situation, you will need to be prepared to make payments on both homes for a period of time, but the idea is to line up the closings to minimize your carrying costs.  It is very important to work closely with your lender and Realtor to ensure this goes smoothly as there are financial risks if you ultimately can not buy once you go under contract on a new home. 
  • Scenario 2: Buy with a Bridge Loan – Real estate values have skyrocketed over the last several years, so many homeowners have a significant amount of home equity to use towards a home purchase.  If you close on a sale/purchase back to back, your equity flows from one house to the next, but what happens when you close on your new home but haven’t closed on the one you own?  You can tap into your home equity with a bridge loan (often secured by your current home) – essentially “bridging the gap” and allowing you to use the equity in your home to close on your purchase and then pay back the loan with your existing home sale closes. These loans can be relatively expensive in terms of interest rate; however, the goal is not to carry this loan for too long.
  • Scenario 3: Using a Line of Credit (HELOC) – this is essentially the same idea as a bridge loan.  Many homeowners have a line of credit secured by their current home available to pull money from to cover the time between the purchase of their new home and the sale of their existing one.  HELOC rates are variable, so in today’s market, they have been adjusting quickly, however, again, this is meant to be a short-term solution, so you are not carrying this loan indefinitely.  
  • Scenario 4: Buy with a Sales Contingency – You can put in a contract to purchase a home with a stipulation that your current home must sell to be able to complete the purchase of a new home.  However, there are many downsides to this option. In North Carolina you there is no longer a true contingency where you get your money back if your home doesn’t sell, so there is a lot of risk to get your home sold in a short period of time.  Also, in the current low inventory market most sellers are unwilling to accept contingent offers as they would rather have a more secure buyer so they can also move forward with their future plans. This is a least desired option with the way our NC contract work due to the financial risk for the buyer. 

If you want to buy a new home but are worried about selling and having nowhere to go, you are not stuck!  Many options are available when you own your home that allow you to purchase a new home and be secure that you won’t be homeless.  Ultimately, it is important to talk to your Realtor and your lender before starting the process to know exactly what the process will entail and ensure that you are prepared.

The Zahn Group is a dynamic real estate group serving the great Charlotte, NC area and upstate South Carolina.  We specialize in helping buyers and sellers in the South Charlotte area.  Contact us to learn more.