The Big Move-Up Buyer Question: How Do You Buy and Sell at the Same Time?

Welcome to Week 3 of my 5-part series, designed as a comprehensive how-to guide for navigating the complexities of buying and selling simultaneously. Whether you’re a first-time move-up buyer or have done it before, this series is for you. This time around, you’ve got more to consider, plan, and get right than when you bought your home.

It’s never straightforward when you’re ready to move to a new home while selling or renting it out.

The logistical and financial challenges can feel overwhelming. You’re likely wondering what comes first, how to manage it all, and how to avoid ending up with two homes or none at all.

Let’s tackle this dilemma step by step to ease your stress levels.

Buy First or Sell First Financial Dilemma: The Real Estate Catch 22

Deciding whether to buy first, sell first, or rent out your current home is a personal decision, but it’s crucial to seek expert guidance to make an informed choice.

Every move-up buyer has unique financial circumstances, family dynamics, current home situations, stress levels, and purchasing goals. Sorting through these factors requires the expertise of your lender and real estate agent.

Today, we’ll focus on the financial aspect of making the buy-first or sell-first decision. Before discussing this with your lender, you need to do a little math, similar to what we advise first-time buyers:

1.) What do you want your monthly mortgage payment to be on your new home? Start by determining a comfortable monthly payment range for your next home. Avoid starting your search online until you’ve established this figure.

2.) How much cash do you want to put into your new home purchase? Consider your total cash outlay for the next home, including any savings or equity from your current home. Identify where these funds are and whether they’re readily accessible.

Next Step: Working with Your Lender

With this information, consult your lender about your preferred monthly payment and total cash outlay. Ensure your conversation focuses on monthly payments to prevent being approved for more than you’re comfortable spending.

Your lender will conduct an approval process, request bank statements, pull your credit, and provide a loan summary sheet indicating the price range you can afford for your new home.

Discuss the following questions with your lender:

• What amount are you approved for while keeping your current home?
• What amount are you approved for if you sell your home first?

Your lender will analyze your debt-to-income ratio to determine whether you can purchase your next home before selling. Your lender will also provide you with a loan estimate, which will give you a good idea of the fees, total cash, and payment you can expect for a house within your budget. They need a property address to do this estimate, so you can give them a general address of a house you liked online. (I know that you’ve looked, even though my last article recommended you resist the urge.) This crucial information will guide your decision-making process.

When You Need to Sell First:

If you discover that you need to sell your home before buying a new one, stay tuned for next week’s article. It will outline the necessary steps to navigate this process effectively.

In the meantime, consider the following factors:

• You may need to arrange temporary accommodation between homes or negotiate a lease-back agreement with the buyers of your current home.
• Be mindful of the time constraints once your home is sold, as you may feel pressured to make quick decisions regarding your new home.
• Explore options like a home contingency, but be aware that sellers may be reluctant to accept it. There are several additions to your offer that can make a seller more open to accepting a contingency, especially in a balanced or buyer-friendly market. Email me if you’d like to learn more.

When You Can Buy First:

If your lender confirms that you can buy before selling, this is the preferred option. It offers flexibility and simplifies the process, although not everyone has the financial capacity for this approach.

Here are some considerations:

• Explore various methods to access cash from your current home or other investments.
• Take your time searching for your next home, ensuring it aligns with your long-term goals.
• Prepare for potential double mortgage payments and the uncertainty of your current home’s sale price. This is not the time to over-price your current home. To ensure a smooth transition, it’s key to list at the best price that the market will support.

Moving Forward:

Your lender and real estate agent must collaborate to determine the best approach for your situation. Your specific financial circumstances and goals will show you the best path forward.

Feeling overwhelmed? I understand, but with my experience, I can help you navigate this process seamlessly. Remember, there’s no one-size-fits-all solution, but together, we can develop a tailored plan for you.

Contact me to schedule a consultation and discuss the details outlined in this article. I’ll share examples of how other clients have successfully managed this process and guide you through the next steps.

Stay tuned for Weeks 4 and 5 of our series, where we’ll cover each option in detail and provide further guidance.