Buying and Selling a Home at the Same Time? These Programs Can Help

Buying and selling a home simultaneously can be a stress-inducing experience.

The timing, especially, can be tough. It could mean having to find (and potentially pay for) a temporary place to live between selling your old house and buying a new one.

However, some companies specialize in solutions to help borrowers bridge this gap that can make buying before selling financially feasible.

Are there lending products that can help you?

Lack of for-sale inventory can make it tough to buy and sell at the same time. Even if you’re able to sell your current home quickly, it might take additional weeks (or months) to close on a new home.

“It’s estimated that 37% of existing homeowners want to move but are hesitant due to the complexities and risks of buying and selling simultaneously,” said Dan Mugge, COO of Calque, a company that partners with lenders to offer trade-in, non-contingent mortgages.

When selling and buying at the same time, many people try to coordinate both closings perfectly. They often need the money from selling to cover the down payment and closing costs on the new one. If they close on the new home before selling the old one, they might not have enough cash for those expenses.

Calque offers the Trade-In Mortgage, a product to help homeowners manage buying and selling properties concurrently. It allows the borrower to tap their current home equity to use as a down payment.

“It essentially takes out the timing factor and the headache of managing the transition from this home to that home,” said Mugge. “They can close on their new home, move out, and then list and stage their current home.”

Calque’s Trade-In Mortgage also allows borrowers to make non-contingent offers when house shopping.

Typically, when someone doesn’t find a buyer for their current home before closing on another, the lender for the new mortgage counts the old mortgage as part of their debt-to-income (DTI) ratio, which can limit their borrowing power.

For this reason, some buyers might submit home offers that are contingent on “getting financing” or “selling an existing home.”

Under Calque’s program, a homeowner doesn’t have to worry about their property “not” selling after listing. If it doesn’t sell within 120 to 150 days (depending on the market), Calque will buy the property at an agreed-upon price.

Having a backup offer in place allows lenders to exclude an existing mortgage from a borrower’s debt-to-income calculation, meaning they can submit non conditional home offers.

Several companies provide similar services, with varying processes and requirements.

With Calque, for example, consumers must first complete a 5-minute questionnaire on their website. Next, they’ll receive a “purchase price guarantee” within three-to-five business days.

This guarantee ensures that if their house doesn’t sell on the open market within the specified timeframe, Calque will step in and buy it from them at the agreed upon price.

According to Mugge, Calque’s offer is lower, typically around 86% to 87% of the retail value of the home. Additionally, there’s a fee linked to this service.

“We charge 1% of the purchase price guarantee, plus $2,000. So if we make an offer of $350,000 on a $400,000 home, our fees would be around $5,500—which includes the $2,000 plus 1% of $350,000.”

Customers, however, don’t have to concern themselves with paying this fee upfront.

“We’re only paid when the home sells, and we’re paid out of escrow, so the consumer doesn’t have to write us a check,” he explained. “It’s the same deal when we buy the house. The fee comes out of the settlement.”

What causes a lack of for-sale inventory?

The real estate market goes through ups and downs, and sometimes there aren’t enough homes available for sale. This can be tough for people who want to buy a home, but can’t find the right one.

In recent years, this problem has become widespread for a number of reasons.

One is that many baby boomers—who make up a large percentage of the population—are staying in their current homes as they age. This is largely due to emotional ties to their property and favorable mortgage rates.

Also, some boomers are choosing not to move because homes have become more expensive. Even though many have significant equity, moving to a new home in today’s market would likely result in paying more, which might not be financially feasible.

Another factor for low inventory is the lock-in effect of previously low interest rates. Some homeowners are hesitant to sell because they have a favorable mortgage rate and they don’t want to give it up.

This has led to some homeowners refinancing their mortgages instead of selling, thus limiting the available inventory.

Lastly, the pace of new home construction slowed in the aftermath of 2008’s housing market crash. While that suppressed the overall pipeline of new properties, the pandemic hampered it further with rising costs and supply chain challenges.

What companies offer these solutions?

Several companies provide this service as a practical solution. These include:

Calque 

Available in 32 states plus the District of Columbia, Calque partners with lenders to offer non-contingent mortgages. To get started, fill out a quick questionnaire to receive a purchase price guarantee (PPG). Once you accept the PPG, you’ll work with a lender to get pre-approved for a conventional home loan. You can then make non-contingent offers and use the equity from your old home to cover mortgage-related expenses.

Homelight

Homelight evaluates your property and decides how much equity you can use to purchase a new home. With this equity, you can make a strong offer without selling your current home first. Your agent will then list your vacant home. Homelight’s fee is 2.4% of the home sale when using an outside lender and closing company; and 1.7% when using their lending and closing services.

Homeward

A Homeward offer gives you money to buy your new home now, and peace of mind to sell your old home later. Having more time to sell can make the process smoother and faster. The fee is 1.9% of the purchase price due at closing.

Knock

Knock is a tech company that helps people buy a new home before selling their old one. They provide money for the new mortgage and down payment, as well as repairs on the old house. Knock also handles and pays for repairs without any interest. You can get up to $35,000 to prepare the house for selling. The fee for using this service is 2.0%, which is based on the old home’s estimated price.

Orchard

Get an interest-free “equity advance” loan for your new home’s down payment without selling your old home first. Since Orchard guarantees your home sale, you become a non-contingent buyer, making your offers more competitive. Once your old home sells, use the proceeds to repay the equity advance at closing. Orchard charges a move first fee of 6%.

Ribbon 

Ribbon is a home financing company that provides homebuyers with cash-backed offers. This allows them to purchase new homes before selling their existing homes. Buyers with pre-underwritten preapproval letters from their chosen lenders can use Ribbon’s services to buy owner-occupied single-family homes, townhouses, and condos. Ribbon sets a minimum purchase price of $200,000 and a maximum of $600,000 for eligible properties. Fees range from 1.25% to 3%.

The bottom line

If you want to sell your home and buy a new one but are worried about being stuck without a place to live in between, there are programs that can help.

These services can allow you to make strong, non-contingent offers and help you beat the competition.

If you’re ready, reach out to a local mortgage professional and see if any of these lending programs are right for you.