Buying a new home before selling your current one is often perceived as a daunting task. Many people assume they need the proceeds from their current home to fund the next, but with proper planning, financial strategies, and market insight, it’s possible—and sometimes advantageous—to purchase your dream home before your old one sells.
In this guide, we’ll explore why you might consider this approach, the benefits and risks involved, and actionable strategies to make it happen.
Why Buy Before Selling?
Life circumstances and market conditions can make buying a new home before selling your current one a strategic choice.
- You Found Your Dream Home
The perfect property might not wait for you to sell your current house. Acting quickly can ensure you don’t miss out. - A Competitive Market
In a seller’s market, waiting to sell before buying may leave you at a disadvantage when desirable homes are snapped up quickly. - Avoiding Temporary Housing
Selling first may require you to rent or move into temporary housing until you find a new home, which can be inconvenient and costly. - Flexibility in Moving
Owning both homes for a short period allows you to transition at your own pace, avoiding rushed decisions and chaotic moving days. - Renovations on the New Home
If the new property requires updates or renovations, having your current home as a base makes the process smoother.
The Challenges of Buying Before Selling
While buying first can offer convenience, it’s important to understand the potential challenges:
- Financial Strain: Managing two mortgages, taxes, and maintenance costs can be burdensome.
- Market Risk: If your current home takes longer to sell, it could delay your plans or increase financial pressure.
- Lending Complications: Qualifying for a mortgage on a new home while still owning your current one may require strong credit and financial stability.
How to Buy Before You Sell: Proven Strategies
1. Bridge Loans
A bridge loan is a short-term financing option that helps you cover the down payment on your new home while you wait for your current home to sell.
- How It Works: The loan is secured against your existing property and repaid once it sells.
- Pros: Offers flexibility and prevents missed opportunities.
- Cons: Interest rates and fees can be higher than traditional mortgages.
2. Home Equity Line of Credit (HELOC)
If you have significant equity in your current home, a HELOC can provide the funds you need for a down payment.
- How It Works: You borrow against the equity in your current home, and the loan is repaid when it sells.
- Pros: Lower interest rates compared to bridge loans.
- Cons: Requires good credit and sufficient equity.
3. Contingent Offers
A contingent offer means your purchase is dependent on the sale of your current home.
- How It Works: You include a clause in your offer that allows you to back out if your home doesn’t sell within a specified timeframe.
- Pros: Reduces financial risk.
- Cons: Sellers may find contingent offers less attractive in competitive markets.
4. Rent Back Agreement
With a rent-back agreement, you sell your home and temporarily rent it from the buyer until you find and close on a new property.
- How It Works: The agreement is negotiated as part of the sale.
- Pros: Provides financial liquidity without immediate relocation.
- Cons: Limited time to stay and potential rental costs.
5. Buy with Savings or Investments
If you have substantial savings or liquid investments, you can use those funds to purchase your new home outright or as a down payment.
- Pros: No need for loans or contingencies.
- Cons: Reduces liquidity, and you may miss investment opportunities.
6. Sell to an iBuyer or Cash Buyer
Instant buyers (iBuyers) or cash buyers offer quick transactions, allowing you to access funds for your new home faster.
- How It Works: These buyers purchase your home directly, often at a slightly lower price, but with minimal hassle.
- Pros: Speed and convenience.
- Cons: May not get the full market value for your property.
7. Extend Closing Timelines
Negotiate a longer closing period for your new home, giving you more time to sell your current one.
- Pros: Reduces the overlap of owning two homes.
- Cons: Requires the seller’s agreement and may not be feasible in fast-moving markets.
Pros and Cons of Buying Before Selling
| Pros | Cons |
|---|---|
| Secure your dream home without delays | Financial pressure from managing two homes |
| Avoid the stress of temporary housing | Risk of delayed sale for your current home |
| Time to transition at your own pace | Potentially higher interest rates on loans |
| Greater control over timing and logistics | Need for strong credit and financial stability |
Tips for Success
- Work with a Skilled Real Estate Agent
An experienced agent can help you navigate the complexities of buying and selling simultaneously. - Understand Your Finances
Work with a financial advisor or lender to assess your ability to carry two properties. - Research the Market
Knowing the average time properties in your area stay on the market can help you plan effectively. - Stage and Market Your Current Home
