By Bill Lyons | Updated on October 22, 2024
TABLE OF CONTENTS

    Buying and selling a house at the same time is a delicate balancing act that requires impeccable timing, strategic planning, and a deep understanding of the real estate market. At first glance, it might seem like juggling two massive transactions at once would be complicated. However, with the right approach, it’s possible to sell and buy a house simultaneously. Many homeowners find themselves in this position and successfully navigate the process.

    The decision to buy and sell a house at the same time often arises from life events, such as growing a family and needing more space, job relocation, or the desire for a change in scenery. Keep reading to learn more about how to buy and sell houses at the same time to ensure both transactions are smooth and successful.

    KEY TAKEAWAYS

    • Buying and selling a house at the same time requires an understanding of various housing market trends and factors, such as employment rates and school rankings. 
    • Engaging with an experienced real estate agent can significantly simplify the dual process by providing market insights and coordinating the timing of both transactions.
    • Financial preparation is crucial for managing simultaneous home transactions. 
    • Flexibility is critical, as real estate situations can change rapidly, making it important to have contingency plans in place.

    How to Buy and Sell Homes Simultaneously

    Buying a house while selling a house is an undeniably complex endeavor, but it’s possible with the right strategy and a clear understanding of the real estate market. Here’s a detailed look into the steps and considerations involved:

    1. Understand the housing market

    Recognizing the current market status is crucial. In a buyer’s market, homes stay listed longer, and prices may be lower, making it an excellent time to buy. Conversely, a seller’s market means homes are snapped up quickly, often at or above the asking price, making it a good time to sell.

    Keep in mind that the broader real estate market can differ significantly from the local market. Research housing trends in the specific location you’re looking to buy and sell. Factors like employment rates, future development plans, and school rankings can influence home values.

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    2. Work with a real estate agent

    Experienced agents can be invaluable in juggling the dual process and handling some of the most complicated aspects of buying and selling a home at the same time. Agents provide insights into market conditions, negotiate deals, and coordinate simultaneous closings to make moving out and in more manageable.

    While it is possible to sell or buy a home yourself, this isn’t always the most profitable route. For example, in 2023, the typical for sale by owner (FSBO) home sold for $310,000 compared to an average price of $405,000 for agent-assisted transactions.

    3. Organize your finances

    Before listing your current home or making offers on a new one, you should get a mortgage pre-approval. The pre-approved amount is based on your income, credit score, and debt-to-income ratio. The credit score you need to buy a house varies by lender and can affect your eligibility and pre-approved loan amount. Yet, getting pre-approved for a mortgage is an important first step because it shows sellers you’re serious and gives you an idea of your budget.

    Organizing your finances is made easier when you use tools like the Griffin Gold app. With this all-in-one financial wellness app, you can access budgeting tools, monitor your credit, track spending and expenses, and get a firm grasp on your financial wellbeing.

    Keep in mind that while many types of home loans are available, one specifically available to homeowners in this transitional period is the bridge loan. This short-term loan can be helpful if you purchase a home without selling your current one.

    4. Determine your timeline

    While it’s ideal for both transactions to align perfectly, not all do. Determine whether you can afford to buy before selling or if you need the proceeds from your current home to fund the new purchase. You might also consider a temporary housing solution if there’s a gap between the two transactions.

    5. Prepare for the unexpected

    Situations change rapidly in real estate. Your buyer might back out, or the home you intend to purchase could fail an inspection. It’s essential to have a contingency plan if either of these situations happens to you.

    If you’re selling first, you can negotiate a longer time between the contract and closing or even a rent-back agreement to give you more time to find your next home. A rent-back agreement allows the seller to continue living in the home after the sale is complete, renting it from the new owners for a specific period. This arrangement can provide the sellers more time to move or close on a new property while ensuring the buyers retain ownership.

    Is It Better to Buy or Sell a House First?

    So how do you buy a house while selling yours? Is it better to buy a house before selling your existing house? Or should you sell your house before buying?

    Deciding whether to buy a new home before selling or vice versa is a common problem many homeowners face. Both scenarios have advantages and disadvantages, and the best decision largely depends on individual circumstances, market conditions, and financial goals.

    Buying a house first

    Buying a house first means you can move directly from your old home to the new one without needing temporary housing. It also allows you to take your time and find the perfect home without feeling pressured to make a purchase.

    Buying first also means you can lock in a price now, and today’s prices may be lower than in the near future. However, if your current home doesn’t sell quickly, you might end up paying two mortgages simultaneously.

    If this happens, you’ll need to ensure you have the financial capacity for the down payment on the new home without relying on proceeds from selling your current home. At the same time, if it takes longer than anticipated to sell your house, you may feel pressured to accept a lower offer.

    Home for sale sign in front of a house.

    Selling a house first

    When selling a house first, the proceeds from your sale can be used to fund your new home purchase, potentially allowing for a larger down payment. You can negotiate more freely when buying without the pressure of another pending mortgage since you’re not in a rush. Additionally, you’ll know how much you can afford to spend on your next home after the sale is finalized.

    That said, there might be a gap between selling your old home and moving into your new one, requiring temporary housing solutions. If you’re in a rapidly appreciating market, the housing prices might increase while you’re in your temporary housing phase. Moreover, if you’re eager to settle after selling, you might rush the buying process, potentially compromising your selection.

    4 Types of Loans for Buying a House While Selling Yours

    Unless you’re buying a house with cash, you’ll likely need to secure financing for your new home. Specialized mortgage products and low down payment home loans can make it easier to afford a down payment on a new home while you sell yours. Below are some loan types that can help homeowners trying to buy and sell at the same time.

    Bridge Loan

    A bridge loan is a short-term equity-based loan that borrowers can use to bridge the gap between buying a new home and selling their current one. This type of financing can be helpful if you need quick access to funds for a down payment or closing costs.

    Home Equity Line of Credit (HELOC)

    In some cases, you may be able to use a HELOC to tap into your current home’s equity and pull cash out to use for a down payment on a new home. However, a lender is unlikely to approve a HELOC if you’ve already put your home on the market and it can take time to secure this type of financing. So, if you think you may buy and sell homes simultaneously at some point in the near future, consider applying for a HELOC now.

    VA Loan 

    VA loans offer a zero down payment mortgage option to qualifying service members, veterans, and surviving spouses. This type of zero down mortgage is one of the best ways to buy a house while selling yours because it minimizes upfront costs, allowing you more flexibility in the home buying process.

    Conventional Loan

    A conventional loan can be a great low down payment mortgage option for those who qualify. With this type of home loan, you can secure financing at a competitive rate with as little as 3-5% down.

    Ensure a Successful Purchase and Sale

    As you navigate how to buy a house while trying to sell yours, keep in mind that the best route will depend on your unique situation and current market conditions. Buying and selling a home at the same time requires you to recognize what’s happening in the market and make decisions accordingly. The advantages of either buying or selling first should be weighed against individual financial landscapes and the broader market outlook.

    Partner with the professionals at Griffin Funding to streamline this delicate balance. Our expertise provides a clear roadmap for simultaneous transactions and ensures that every step is grounded in an informed strategy. While the journey of selling and buying a house at the same time can seem daunting, it can be a rewarding and seamless experience with the right approach.

    Are you preparing to buy and sell a house simultaneously? Contact us today for more information about the best way to buy a house while selling yours. We can discuss your mortgage options and help you find the most efficient and affordable path forward. Reach out or apply for a mortgage online today.

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    Frequently Asked Questions

    Is it a good idea to buy and sell real estate at the same time?

    Like other forms of real estate investments, buying and selling a home simultaneously can be profitable when done correctly. These transactions can capitalize on market dynamics. For instance, purchasing properties in undervalued or emerging markets and selling in areas experiencing peak demand can maximize returns.

    Additionally, by leveraging the equity from a sale, investors can potentially secure better mortgage rates or pay the new mortgage in full, avoiding interest costs.

    Is buying a house while selling a house difficult?

    Buying and selling a house at the same time presents various complexities. Balancing the timeline, financing, and logistics of two major real estate transactions can be challenging. Homeowners must coordinate closings, align mortgage requirements, and potentially face the financial strain of two loans if the sale of their existing home lags.

    Market fluctuations can add another layer of unpredictability, potentially impacting property values and demand. While selling and buying a house at the same time isn't impossible, and many homeowners successfully navigate this path, it requires careful planning and flexibility.

    How do I pay for a house if I'm selling and buying at the same time?

    When you sell and buy a house at the same time, you’ll often rely on the proceeds from your current home's sale to fund the purchase of the new property. This is commonly facilitated through sale and settlement contingencies in contracts, where the purchase of the new home is contingent upon the successful sale of the current one.

    In an ideal scenario, both transactions are timed perfectly so that the closing from the sale provides the necessary funds to purchase the new home. However, if timing becomes an issue, homeowners can opt for bridge loans that provide the funds needed for the new home's down payment and are repaid upon the sale of the original property.

    Do I have to pay capital gains tax if I sell my home and use the proceeds to buy a new one?

    If you’re selling your primary residence, then you can typically avoid most or all of the capital gains tax on the transaction through the Section 121 exclusion, also known as the home sale exclusion. This tax break allows you to exclude up to $250,000 of gains from the sale of your primary residence or up to $500,000 if you file a joint return with your spouse. 

    Additionally, if you’re a real estate investor, you may be able to defer capital gains tax by using 1031 like-kind exchange. A 1031 exchange allows investors to defer capital gains taxes when selling a property if they use the proceeds to purchase another investment property of a similar nature.

    Bill Lyons

    Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.