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Navigating the simultaneous purchase of a new home and sale of your current one is a complex real estate transaction. Success hinges on strategic timing, understanding contingency offers, and exploring flexible financing options like bridge loans. By researching your local market and preparing for potential hurdles, you can manage this process effectively and minimize stress.
In a perfect scenario, the sale of your current home would close just before you purchase the next. However, real estate markets are rarely predictable. Your first step is to research both the market you are selling in and the one you are buying in, if they are different.
For sellers, understanding the average days on market (DOM) for comparable homes, or "comps," is critical. DOM is a key real estate metric that measures the number of days a property is actively listed before going under contract. Pricing your home competitively from the start is essential to avoid price reductions and attract offers quickly. A local real estate agent can provide a comparative market analysis (CMA) to help you set the right price based on your moving timeline. On the buying side, thorough research prepares you to act decisively once your current home is under contract.
If you need the equity from your current home's sale to fund the down payment on your new one, your purchase offer will likely need to include a sale and settlement contingency. This clause makes your offer to buy the new home contingent upon the successful sale of your existing property.
It is important to understand that contingent offers are less attractive to sellers. Based on our experience assessment, in a competitive market, sellers often prefer offers without such conditions. Even after accepting your contingent offer, a seller can continue to entertain other bids. If they receive a better, non-contingent offer, you will typically have a short window (often 24-48 hours) to remove your contingency and proceed unconditionally or risk losing the property.
When your home hasn't sold before you find a new one, several loan products can provide the necessary liquidity. It is advisable to get quotes from multiple lenders to compare terms. Lenders will calculate your debt-to-income ratio (DTI), which is your total monthly debt payments divided by your gross monthly income, to qualify you for a new mortgage. Most lenders prefer a DTI of 43% or lower.
Common financing solutions include:
Another strategy is a rent-back agreement. In this arrangement, the buyer of your current home agrees to let you rent it back from them for a period, typically 60-90 days, after the sale closes. This gives you more time to move. However, not all lenders permit this, and it may require a price concession or rental payment to the buyer.
Managing both a home sale and purchase requires careful planning. Price your home competitively from the start to attract buyers quickly. Understand the risks and potential drawbacks of a sale contingency in your specific market. Finally, explore all financing options with your lender early to understand the best path forward if your timelines don't align perfectly.
