Should You Buy First or Sell First?

There comes a time in many homeowners’ lives when they feel the urge to pick up and move. Whether you have dreams of a larger home or want to relocate to a new area or downsize, you’ll need to consider what it means to buy a new home and sell the one you already live in.

Handling one property transaction can be stressful enough—buying and selling back to back is even more complex. Thankfully, there are ways to keep it simple. Here’s what you need to know about how to buy a house while selling the one you already have.

The first question you need to ask is whether you want to buy a new home before you sell your current one, or if you want to sell first and buy second. There is no right answer, and everyone’s situation is different.

Not sure what to do? Most homeowners opt to buy a new home before selling their old one. It’s often a simpler, more linear process: buy, move and sell. While selling first can simplify the process of financing your next home purchase, it also comes with a more complex timeline. It’s best to talk with a real estate agent—and they’ll likely recommend that you buy before you sell.

The safest option is to buy a new home with a sales contingency. This means that the sale of your new home won’t close until you sell your current home. This allows you to use the profits from the sale as the down payment on the new home. A sales contingency also consolidates the timeline for buyers and sellers, since the purchase of one home depends on the sale of another. The downside is that many sellers will turn down offers with sales contingencies in favor of more firm offers.

A bridge loan is the most common method for buying a new home. A bridge loan uses your current home as collateral, giving you access to its equity in the form of cash for a down payment or outright full purchase with bridge lenders that allow cross-collateralization. Bridge loans can also cover the cost of carrying two mortgages until you sell your current home, making them a smart solution to buying before you sell. Keep in mind that getting a bridge loan is largely dependent on the amount of equity you have in your current home.

If your current home is in a hot real estate market and free of any major defects, there’s a good chance you’ll find an eager buyer quickly. If that’s the case, listing your home at the same time you put in an offer on another home can lead to a simultaneous transaction. Technically, this would mean selling your home before you close on a new one; however, the 2 transactions would happen in parallel—similar to a sales contingency clause. Keep in mind that this is a calculated risk: you’re assuming your home will sell quickly. Have a safety net strategy just in case!

Each of these strategies introduces a wrinkle into a property transaction. At Arrival Home Loans, we understand bridge financing. That is all we do, all day, every day. And although bridge loans may be a great solution, it makes sense to consider all of your options first. That’s why it’s so important to work with a real estate expert you trust and a mortgage lender who understands your situation.