Buying a home while selling a home — and trying to close both deals at the same time — requires great timing and coordination, a little luck and the understanding that at least one of the parties involved is probably taking a risk. In a sellers’ market, buyers often face more risk and frustration than sellers.
What is a “sellers’ market”?
It’s a real estate market in which sellers are more likely to sell their home for close to asking price and where listings spend less time on the market. Those factors give sellers more power when it comes time to negotiate. According to an analysis published by Zillow, the nation’s top five sellers’ markets are:
Buying a home can be stressful, selling a home can be stressful; doing both at the same time is almost sure to result in a few sleepless nights. Accepting that fact upfront and doing some advance planning will help your situation.
“It’s a total dance, but a well-thought out timeline can help alleviate some of the anxiety,” said Silicon Valley-based real estate agent Eric Boyenga. “It’s not just about working out the timing of your sale and purchase, but most people buy homes that need some work done before they move in, and time is limited, so they need to get plumbers and painters and floor people in when they need them and in the order that they need them.
“There are a lot of details that need to be handled very quickly,” said Boyenga. “But if you approach this like you’re managing a major project at work, and you can adhere to a timeline, your transition can be a fairly smooth one.”
Start planning early
If you are in a simultaneous buy-sell adventure, seek professional advice early on. Meet with your real estate agent and lender far in advance. An agent who has experience in your local market will be able to help you understand your home’s value and should be able to talk you through the various buying-selling scenarios.
Boyenga said he often works with clients who move into a short-term rental before selling because they don’t want to live through the hassle of real estate showings. In a market like San Jose’s, where many homes are selling within a week of being listed – and for well over asking price – that also gives homeowners the luxury of not feeling rushed to move or purchase a new property.
Option 1: Buy first, then sell
Buyers who qualify may want to buy their new home before selling their old one. Understand that you’ll likely need to prove to your lender that you have enough cash in the bank to make a down payment, pay closing costs and cover mortgage payments for two homes. Yes, buying a new home while you already own a home may be a financial stretch, but in a sellers’ market, there are typically fewer homes for sale than you’d find in a buyers’ market. That fact may add difficulty to the task of finding a new home that suits your needs and budget.
Option 2: Sell first and buy second
If you sell first and buy second, you have the advantage of knowing exactly how much money you have to invest in a new home. Because sellers have the power in these situations, you can likely include a rent-back clause in your sales agreement, through which the buyer allows you to rent your home back for 30 to 60 days after closing, to give you more time to find a new place.
“Most people can’t handle or don’t want to handle paying two mortgages at once, so we emphasize that they must make sure there are no weak links in the chain,” said Boyenga. “Financing needs to be solid, the people you’re bringing in to do the painting or clean up need to be available at a moment’s notice.”
Many variables can come into play when you’re buying and selling property, and any one of them can affect the decisions you make along the way. Take time upfront to prepare yourself, your home and your finances so your real estate transactions go as smoothly as possible.