Buyer Before You Sell or Sell Before You Buy
A reader recently reached out and asked me a question I hear often. They want to buy a new home and sell the old home but need the money from their current one to afford the down payment for the new home. They are not in a position to carry two mortgages and were feeling overwhelmed by what seemed like an impossible situation.
This is more common than you might think, especially for first-time sellers moving into their next home. Many homeowners run into this timing dilemma and are unsure how to proceed. So let’s walk through the options together in detail.
The Ideal Scenario
In a perfect world, you would list your home for sale and ask for a delayed closing of about 60 days. Then, you would also request 60 days of post-closing occupancy. That means after your home sells, you can stay in it as a renter for another two months.
This approach gives you time to buy a new home without the pressure of rushing out the door. Once your home is under contract, you can make offers on new homes either with or without a home sale contingency, depending on where you are in the process. After closing, you will already have the cash for your next purchase, and you are no longer a homeowner, just a renter temporarily.
This plan reduces stress and aligns the timing of both transactions. However, it does carry a risk: what if you cannot find your next home in time? That’s where flexibility and having a backup plan become crucial.
The Risk of Not Finding a Home
This is the part that trips people up. If you sell the old home and you do not have a new one lined up, you may need to rent temporarily. I understand this may not be ideal, especially for families who want a yard, pets who need space, or anyone used to more room. It might mean putting some of your belongings in storage or adjusting your daily routine.
Some people are fine taking that risk, while others find it unacceptable. You need to be honest with yourself about what level of uncertainty you can manage. If you are the kind of person who needs predictability, you may want to explore alternative financing options that allow you to buy a new home first.
What Is a Bridge Loan?
A bridge loan allows you to borrow against the equity in your current home to fund the down payment on your new one. This loan is short term and often interest-only. It helps you buy a new home and close on your new home before you sell the old home.
You can learn more about how bridge loans work by speaking to your lender. Some loans even offer deferred payments to help ease your financial burden temporarily.
Bridge loans typically last six months to a year, giving you enough time to sell your current home. However, you’ll need to qualify for the loan based on your income and credit, and lenders will assess your ability to carry both loans even if payments are deferred.
Other Financing Options
If a bridge loan is not the right fit, there are still a few alternatives to consider:
- Borrow from family: If available, this can be the most flexible option with minimal fees.
- 401(k) loan: Many retirement plans allow you to borrow for a home purchase. Just make sure you understand the repayment terms, interest implications, and what happens if you change jobs.
- Home equity line of credit (HELOC): If your current home has not yet been listed, you may be able to tap into its equity using a HELOC. This option is usually less expensive than a bridge loan but must be secured before listing your home.
Each of these options has pros and cons, so talk to a financial advisor or lender about what might work best given your financial situation.
Making Contingent Offers
If none of the above options work and you need to sell before you buy, you can start making contingent offers. This means your offer to buy a new home depends on the sale of your current one. However, be prepared that sellers are often hesitant to accept these offers unless their property has been sitting for more than two weeks.
If you decide to go this route, the first step is to prepare your home. Declutter, clean, and stage it so you can list it quickly. My rule of thumb is that you should be able to have your home on the market within 3-4 days of getting an accepted offer on your next home.
Be aware that sellers may ask for a limited time clause. That means they can continue to show the home and accept backup offers. If they get a better offer, you will have the first right of refusal which means you either remove your home-sale contingency or step aside and get your deposit back.
Contingent offers can work, but they require careful coordination and a deep understanding of your local market conditions.
What Others Had to Say
I asked a few friends that have recently been through this scenario and here is their feedback. One friend explained that they sold their first home and rented for a year before buying their next property. It was not ideal, but it gave them the time they needed to find the right place. Another friend mentioned using savings for a down payment while carrying both mortgages for a short period, knowing they could handle it temporarily.
Others emphasized the emotional challenge of selling and buying at the same time. One person shared that they had found a buyer but ended up walking away from a house they loved because the deal timing was not working. They eventually found something better, but it highlighted the importance of flexibility.
Another person pointed out how difficult it is to time both transactions perfectly, saying they ended up with back-to-back closings and zero time to move. Planning as much as possible and having backup housing can be key.
The most useful advice I heard? Plan for delays, expect to be uncomfortable for a short time, and talk to your lender about your full range of options.
Final Thoughts
The biggest takeaway here is that you do have options, but none of them are perfect. Whether you sell the old home first and negotiate post-closing occupancy, take out a bridge loan, borrow from family, or go the contingent offer route, you’ll need a plan and a willingness to adapt.
Talk to your lender early. Speak to a real estate agent about your local market. And understand your own risk tolerance so you can make a decision that works for your unique situation.
Need Help Navigating the Process?
I am happy to connect you with a vetted real estate agent in your area who can walk you through your specific options. Whether you are selling, buying, or both, the right strategy will make all the difference. Reach out here and I will make a personal introduction.
