How to Sell a Home and Buy a New One (at the Same Time)

Life happens fast. And sometimes, a homeowner may find themselves in the position of having to sell a home and buy a new one, without any sort of break in between. There are plenty of reasons for this, but it’s also just part of the process of moving. After all, you have to live somewhere after you sell your home, and unless you want to rent for an indeterminate amount of time the ideal situation would just be to have a new home to move into.

The process you need to undergo to sell a home and buy a new one at the same time depends largely on the type of market you’re dealing with. In a seller’s market, for example, when there are more buyers than homes for sale, you have a bit of leeway in terms of contingencies and what you can ask of your buyer. And in a buyer’s market, when there are more homes for sale than people looking to buy them, you’ll have more flexibility with what you can ask of the seller of the home that you’re interested in purchasing.

Your real estate agent will be your guide during all of this. In addition to helping you with the balancing act required of buying and selling a house at the same time, they’ll also be able to provide you with helpful guidance that you can use to facilitate as smooth of a process as possible.

There’s always going to be a risk when you need to sell a home and buy a new one concurrently. Whether that risk is for the buyer or the seller (or both) depends on how you approach it. Below, we’ll go over what you need to know—and what your options are—when buying and selling at the same time in both a seller’s market and in a buyer’s market.

The Questions You Need to Ask

To get a feel for what your best course of action is, start by figuring out the answers to a few key questions.

Will you be able to get a new mortgage on top of your existing one? Not all lenders are eager to incur the inherent risk of giving a mortgage to someone for a second home when they already have a first one. Depending on your credit and mortgage payment history, you may be able to qualify for a second mortgage while sitting on another one, but you’ll have to show proof that you can cover costs for both.

Can you afford to own two homes at once? Even if the bank will lend you the money for a concurrent mortgage, do you want one? There are a lot of costs involved in purchasing a new home, including a down payment and closing costs. Many home buyers rely on the profit they make from the sale of their home in order to cover these costs, so it may not be realistic to take it all on at once.

What will you do if there’s a break in between when you sell a home and buy a new one? In a worst case scenario, where you have time in between selling your home and purchasing a new one, what does your situation look like? Ask your realtor about your options, including whether there are month-to-month rentals available or rentals with flexible lease termination policies. Also consider whether you have someone you can stay with, or if a hotel is tenable. While most buyers would prefer to move in to their new home right away, cover your “just in case” scenario so you can focus on the task at hand without being scared of the unknown.

Buying and Selling at the Same Time in a Seller’s Market

When you need to sell a home and buy a new one at the same, doing so in a seller’s market is both a blessing and a curse. That’s because while you’ll likely have an easier time selling your house, the seller of the home you’re looking to buy may have less incentive to be flexible when it comes to the special accommodations you ask for. Regardless, you’re not out of luck. Here are your two best options for concurrently selling and buying a home in a seller’s market.

Option #1: Ask for a sale and settlement contingency

A sale and settlement contingency is one of two primary types of home sale contingencies. Simply put, it’s a request made in the offer for the home you’re looking to buy that stipulates that your purchase is dependent on the sale of your existing home.

This is different than a straight settlement contingency, which is used for homes that are already under contract. (Though, if you can swing it, your best bet would be to get your home under contract and then go make an offer on a new home. Sellers consider a settlement contingency to be less risky than a sale and settlement contingency.)

With a sale and settlement contingency, you won’t be required to lock in your new home purchase until your home sale is ready to go. But there is a catch. Sale and settlement contingencies come with a “kick-out” clause, meaning the seller of the property you’re looking to buy can continue to market the property and, if a better offer comes in, they can choose to take it. If that happens, you’ll get notification of the new offer and will have the option to remove the contingency and go forward with the purchase or to back out.

Option #2: Ask for a rent-back agreement

Talk to your buyer about a rent-back agreement, which provides you some wiggle room after the sale to close on a new home. With this agreement, you do close on the home you’re selling, but the buyer agrees to rent the home to you for a specified period of time. If your buyer is open to it, it tends to be more cost-effective than renting out a new place or storing your belongings while you couch surf or stay at a hotel.

Buying and Selling at the Same Time in a Buyer’s Market

Like buying and selling in a seller’s market, there are both benefits and drawbacks to needing to sell a home and buy a new one in a buyer’s market. On the one hand, you’ll probably have an easier time finding a new home (and more room for contingency negotiations). But you may make less profit on the home you sell, and/or deal with an inflexible buyer. These options tend to be the best way to go.

Option #1: Ask for a sale and settlement contingency

Sale and settlement contingencies, described in the section above, are much more likely to work in a buyer’s market. With less offers coming in, sellers are usually more amenable to the request. Plus, while the seller can still continue to seek other offers, you have less of a chance of losing out on the purchase because there’s less competition on the market.

Option #2: Ask for an extended closing

Most closings happen 30 to 45 days after the offer is accepted. That being said, you can ask the buyer of your home for an extended closing to give yourself more time to find and buy a new home. The exact amount of extra time you ask for depends on how confident you are that you can find a new home, though again, a buyer’s market is the ideal time to find a new home fast. If the buyer really loves your home, you may be able to get 90 days or more tacked on to your closing date so you can search for and purchase your next property.

Other Options?

You’ve got a few additional options on top of the best practices already listed. If it’s financially realistic for you (and realistic in the current market), talk to your realtor about going one of these routes:

Rent out your current home. You may be able to find a renter for your existing home easier than you can find a seller. This way, you still make some profit you can use toward your next mortgage, even if it won’t cover the costs of buying a new home.

Get a HELOC. A home equity line of credit (HELOC) is a loan you take out against the equity of your home. Choosing this option may get you what you need for a down payment and closing costs, which you can then repay after you sell.

Get a bridge loan. See if you qualify for a bridge loan, which is a short term loan secured against your current property that you can use to cover your down payment and closing costs. These tend to be more expensive than a HELOC, however, and you’ll have to qualify to have two mortgages.

Work with your realtor to determine what your best plan of attack is. There are a lot of moving pieces to juggle, but with a good plan and strong negotiations you should be fine.