Buying and Selling a House at the Same Time: How You Can Make It Work

Buying and selling a house at the same time can be stressful, especially if you need the funds from the sale of your current home for your next one.

Fortunately, with some planning and a great agent, you can overcome the common hurdles and navigate both transactions successfully.

In this article (Skip to…)

• Buying and selling groundwork
• Buying before selling
• Selling before buying
• Buying and selling at the same time
• How to make financing work
• New ways to buy and sell
• What’s the right move for you?
• Buying and selling FAQ

Laying the groundwork for buying and selling

In a perfect world, you’d buy your new home, move, settle in, and then list your original home on the market. Unfortunately, for most people, buying and selling a house at the same time is not that easy.

Paying two mortgages at the same time is costly. Even if you can afford two house notes, you may still need the money from the sale of your current home to buy the new one.

To know if you should buy before selling or sell before buying, it helps to understand the pros and cons of both.

Buying a house before selling

While there’s no wrong method when it comes to buying and selling a house at the same time, your options for doing so may be limited.

The reasons for this include whether you qualify for carrying two mortgage notes and need the money from the sale of your current home to buy the new home.

Another important variable is whether you’re in a seller’s or a buyer’s market.

Pros

One of the biggest fears people have when selling their home prior to buying one is ending up without a home for an unknown time period. Being able to buy a house first eliminates this challenge.

If you’re in a seller’s market, being able to make a non-contingent offer is vital. This could be the difference in whether or not your offer is even considered.

Beyond the fear of having to find a month-to-month rental, buying a home first means far less stress when moving. The option to move at your own pace is huge. Not to mention that buying before selling means moving only once.

Cons

If you’re under contract on your new home, you may feel rushed to sell your old home. This could lead to accepting a lower offer than you otherwise would have.

Buying a house before selling may mean being unable to put as much money down as you would’ve liked. A smaller down payment could make your offer less attractive to a seller than one with a more significant down payment.

If you can’t sell your home in the timeframe you had hoped, you could be left paying two mortgages indefinitely. This could be financially dreadful.

Selling a house before buying

Being able to sell your existing home first is generally the least stressful because there’s less risk. You’ll know exactly how money is being netted from the sale of your home. This money can then be allocated towards your new home’s down payment, closing costs, and moving expenses.

Pros

By selling your current home first, you eliminate the need to pay two mortgages simultaneously. Even if you can afford to make both payments, it’s rarely the best financial plan to pay two house notes at once.

If you have decent equity in your home, selling first could mean the difference in how much you put down on your new home. Not only can a sizeable down payment appeal to sellers, but it also means a smaller monthly payment on your new mortgage.

Selling a home before buying one also allows you to put all your focus on one area. Splitting your time and energy between buying and selling a house at the same time could mean added stress.

Cons

The biggest drawback to selling first is that you’ll likely have to find a temporary housing solution. Add to this challenge having to double up moving costs and other applicable fees such as storage.

Buying and selling a house at the same time: Getting the timing right

Successfully buying and selling a house at the same time comes down to timing. While you can’t control everything, there are a few things you can control, making things significantly easier.

Although you can’t really control the timing, having a good plan is the best place to start.

There are many external circumstances when buying and selling a home at the same time. Stay realistic about any potential delays and mix-ups, then plan accordingly.

At a minimum, work closely with your agent on timelines. Make sure you have sufficient time to get through the closing process. This goes for both your new loan and the loan for the buyers of the home you’re selling.

A good goal is to get both the buyer of your current home and the seller of your next home to agree to adjoining closings or any necessary contingencies.

How to make financing work

The most important factor to being able to buy and sell a house at the same time typically comes down to your finances. It may be that you don’t qualify to carry two mortgages at once. Or, you may not have the down payment for your new home without selling your current home.

Understanding what you qualify for, with and without buying or selling first, is imperative. This is when a good mortgage lender can help.

If you qualify to carry two mortgages but don’t have the down payment funds without selling first, here are some possible solutions.

Home equity line of credit (HELOC)

A HELOC, or home equity line of credit, allows you to borrow against the equity in your current home. If you qualify for a HELOC, you may be able to access your down payment funds, and then pay off the HELOC when your home sells.

Bridge loan

A bridge loan is a form of short-term financing that can serve as a source of funding as you transition from your current home to your new home. Bridge loans can be used to finance the purchase of your new home before selling your existing one.

401(k) or other investment account loan

Using your 401(k) to help with your down payment is a common method for accessing down payment funds. There are a number of benefits to this route. Borrowing from your 401 won’t hurt your credit scores or debt ratios. Other investment accounts may have similar benefits. Speak to a financial advisor about the pros and cons of accessing your investments.

Low-down-payment mortgage

You may have planned to use the equity from the sale of your current home as a sizeable down payment on your new home. But, you don’t have to. You may be able to go with a smaller down payment, possibly just 3.5% to 5%. You may even be able to make a principal reduction and have your new loan recast after your current home sells.

Contract contingency

While contract contingencies aren’t ideal, especially in a competitive market, sometimes it’s your only option when trying to buy a home before selling one. A seller may be more likely to consider contingent offers if they’ve had difficulties selling their own home. A contingent offer could be a win-win for you and the seller.

A new way to buy and sell a house at the same time

In recent years, iBuyer companies have emerged to help buyers who have to buy and sell a house at the same time.

An iBuyer is a company that uses technology to instantly make an offer on your home. iBuyers represent a considerable shift in the way people are buy and sell homes. In many cases, these companies can offer a simpler, more convenient alternative to a traditional home sale.

Companies such as Opendoor, Knock, and Homeward have varying advantages and processes, but all are meant to help homebuyers get into a new home before selling their existing home.

Bottom line: What’s the right move for you?

Buying and selling a house at the same time comes down to preparation, timing, and a little bit of luck.

A good real estate agent can be one of your best assets when trying to buy and sell a house simultaneously. But don’t forget that it’s important to understand your financing options before making any moves. Speak to a mortgage lender and can get fully pre-approved first.

Buying and selling FAQ

Is now a good time to sell a house?

Yes. With supply constraints and moderate buyer demand, the current housing is still good for sellers. With elevated mortgage rates, it could make sense to sell sooner rather than later, and take advantage of any advantageous seller conditions.

Can I use a HELOC for a down payment on a new home?

Yes. Assuming you have sufficient equity in your home, a home equity line of credit can be a great way to access down payment funds for a new home.

How do you buy and sell a home at the same time?

There are a number of effective strategies for buying and selling a house at the same time. Working with an experienced real estate agent can help. Ensure your finances and credit are in order, and get fully pre-approved first.

Is it hard to buy and sell a house at the same time?

Trying to sell your house and find a new one at the same time can be a challenge. However, the steps involved in buying and selling simultaneously can be mastered with proper preparation.

What happens to your mortgage when you sell a house and buy another?

In general, you must pay off any mortgage or loans secured on a home when you sell the property. In a traditional sale, assuming you have sufficient equity in your home, your mortgage will be paid off when you sell your house.