Your home may have been the epitome of everything you ever wanted when you first bought it, but maybe it’s no longer up to snuff. So, understandably, you’re looking to buy a new one. As exciting as this may be, trying to buy a house while you’re selling your current one isn’t going to be a walk in the park.
Fortunately, there are a few (nine to be exact) ways you can go about finding a new home while your current one is on the market.
Around many housing markets in the country, housing inventory is still low. It’s understandable that you’d want to buy a home now because you don’t want to risk settling for a home you’re not entirely in love with (at the end of 2020, 52% surveyed real estate agents who said, “bidding wars are on the rise in my market,” but today, the percentage of agents who are still seeing bidding wars rise in their area has declined to 37%).
The thing about buying before selling is that you could be saddled with two sets of mortgages and bills. It is still a seller’s market so you may not have to wait long for your house to sell.
If you found a house you’d like to put an offer on, you could include a sales contingency. This contingency simply states that you will go through with the sale as long as your current home is sold by a particular date. If the home isn’t sold, you can back out of the deal.
A bridge loan is a high-interest loan that you can use as a down payment on your new home and the loan will be repaid once your current home is sold.
You can access the equity in your current home immediately. This means you can put your house on the market and submit an offer on a new property without needing a sales contingency. Also, bridge loans usually don’t require the borrower to start repaying the loan for the first few months. This gives the borrower the ability to pay back the loan when their old home is sold.
As good as a bridge loan can be, there are some drawbacks, which include:
- You may have to pay for an appraisal
- You’ll have to cover closing costs and associated fees
- Could run into a situation where you have two sets of mortgages and bills
- High interest rates
If your home has enough equity, you could use that equity for collateral toward your new one. This is similar to a bridge loan, but it creates a lien on your home and reduces the value of the property.
Keep in mind that if you do this, it will alter your debt-to-income ratio and that could stand in the way of being approved for a new mortgage.
Ask yourself if you absolutely have to sell your home right now. If you don’t, you might want to consider renting your property for a while, list it as a rent-to-own property, or put it on a site like AirBnB or VRBO. If you don’t have the time to manage a rental property, consider working with a professional property manager or a local agent.
If you’re in an area where houses are being snatched up within days of being on the market (and for more than asking price – your realtor should be able to advise you on this), then this may be a good option. Do keep in mind that you’ll be up against some competitive buyers.
In a scenario where your house sells quickly but you haven’t been able to find a new home yet, you could ask the buyer if they’d be open to a rent-back agreement. This basically means you’ll rent the home from the buyers for a period of time until you’re able to buy a new one.
Most people want to close on a house as quickly as possible. However, you don’t have to. When you’re selling, you could ask the buyer to stretch out the closing period so you have more time to close on the home you’re buying.
If push comes to shove and you want a low-risk way to buy a new property while yours is on the market, you could consider a home trade-in program like HomeLight’s Cash Close or Trade-In Program.
Putting your house on the market while you’re shopping around for a new one can be overwhelming, but with the help of a realtor, you can go over the options available to you. Using their advice, you can choose the best course of action for your particular situation.