Selling a house and buying at the same time sounds like a lot to deal with but it absolutely can be done. I have three tips on how to make it happen with the pros and cons of each.
Hi, my name is Johanna Dueren, I am a realtor with Circa Properties here in beautiful St. Louis, Missouri. And if you’re new to my channel, I would love it if you would subscribe and hit that notification bell down below. I put out new videos every week, always something new and interesting regarding the St. Louis real estate market or neighborhoods in St. Louis. Or just tips and tricks on how to purchase and sell a house. Okay. So how do you sell the house you’re living in and purchase a new house all at the same time? It does sound like it’s a lot. It sounds like it’s very stressful, but it can be done. There are three main ways to make it happen.
The first way to go about selling a house and buying at the same time is to use something in your contract called a home sale contingency. You may have heard of this, but may not know what it is. So what is a home sale contingency? When you go to purchase your new home, you will add an extra piece of the contract called a home sale contingency. That’s basically telling the seller of the property that you are going to purchase, that you can not close until you sell and close on your old house. So it’s really just an extra piece of the contract that’s added to the purchase offer, for when you are making an offer on the place that you’re going to be moving to. So let’s talk about pros and cons. The pro of using a home sale contingency when selling a house and buying at the same time is that it’s really clean and it protects you. So basically in writing legally, you cannot close on the new house until you have closed on the old house, which protects you because financially then you are not burdened with both properties. If for some reason you cannot sell your old house.
So on the plus side of using a home sale contingency when selling a house and buying at the same time is it’s a lot of protection for you. It’s going to legally protect you. It’s going to financially protect you, so that you don’t have the burden of two homes at once. So what is a con to using a home sale contingency? Well, in this market it has been consistently a sellers market here in St. Louis. And when a new house comes on the market and it’s a beautiful home and it’s priced right, even if it’s priced a little bit higher, there are multiple offers. So when you are competing with other buyers and you have a home sale contingency, it’s going to make your offer a lot less desirable to the seller. If your dream house comes on the market and you are one of five offers and the other four offers don’t have a house to sell, they are not going to be as interested in going with your contract because it’s just one more thing that they would all have to worry about.
Another con of using a home sale contingency when selling a house and buying at the same time is that there is something called a kick out period, that’s in the contingency. So basically what happens is when you include that home sale contingency with the purchase contract, there’s a period of time, usually it’s anywhere from 48 to 72 hours, that the seller can ask you as the buyer to firm up your contract and remove the contingency. So then you’ve got anywhere from 48 to 72 hours to try to figure out how, and if you can firm up, remove that home sale contingency and just move forward with the purchase of the house without selling your house. The reason that would happen most likely is because that seller has continued to market the property and show the property. And now they have another buyer that does not have a house to sell. So that can often lead to broken hearts. And it’s just something to think about if you are going to use the home sale contingency, that there is going to be that kick out period.
Bonus tip for using a home sale contingency when selling a house and buying at the same time If you are going to do that, I would highly recommend that you spend a good amount of time, totally prepping your house to sell. So let’s get in let’s declutter, let’s clean, let’s paint. And do all the things that we need to do to make it 100% ready for the market. So that when you get out in the world and you find the house that you’re going to be writing on, then you are instantly ready to put your house on the market the second you get your new house under contract. Option number two for buying and selling at the same time is using the financing to make it happen. There are a couple of different ways you can do that. You can either get a bridge loan with the lender that you’re working with, which would basically cover the mortgages for your past or the house that you’re moving out of. And the house that you’re moving into all at the same time.
Usually they are shorter term loans. So you’re not going to obviously be in a 30 year bridge loan. The interest rate is going to be a little bit higher on something like that, but it would allow you to carry both properties at once. Another financing option could be to just find out if you qualify to purchase the new house without selling your old house. Sometimes if you have enough equity, if you have enough… If your debt to income ratio is low, if you have enough of a down payment, you won’t necessarily have to sell in order to buy. So that’s definitely an option to talk to the lender about and see if you can just move forward that way. The pro to either using a bridge loan or to just financing the new house without selling, is that you are basically removing that home sale contingency option if you are in competition with another buyer. So it will make your offer, if you’re in competition a lot more attractive to a seller.
The cons to doing it this way when selling a house and buying at the same time is really clearly just financial. So if you do end up carrying two mortgages for a while, it could be a financial burden for you. If the cost of the bridge loan is high, that could also be a financial burden for you. So you really need to sit down with the lender and figure out what all those costs are going to be before you commit to doing that route. Bonus tip for using the lender to get this done is really to use a lender that you really know and trust. Find somebody local. Don’t use an online bank where you’re just going to be a loan number to an 800 number somewhere to somebody across the country. Find somebody that either your real estate agent recommends, find somebody that either a friend or family member has used and know and trust. It’s going to be really important because you’re going to need to have a lot of access to that person, to work through all the numbers and find out what all of the costs are going to be, before you get into possibly carrying two mortgages.
Option number three when selling a house and buying at the same time is to move twice, which could suck. With option number three, moving twice we go ahead and put a sign in the yard, have showings, get your house under contract and maybe even close. But what happens is you pack up, you move out. In the meantime either before you close on your old house, or after you close on your old house, you continue to look for the new one.
The pro to doing it this way when selling a house and buying at the same time is you’re very clear about the money. You know how much money you’re going to get from the property that you’re selling. You know how much money you’re going to have to put down on what will be the future property. The other pro on that is that it removes that home sale contingency again, so that if you are in competition on the new house, your offer is going to be a little bit more exciting to a seller.
Now, obviously the con of moving twice is moving twice. That sucks. Nobody wants to do that. And just the idea of boxing, everything up, putting it all somewhere and then boxing it all again and putting it somewhere else is a total pain in the butt. My bonus tip for moving twice when selling a house and buying at the same time is to try to make it fun. If you have to move twice, maybe think of somewhere that you can move and get yourself into a month to month lease that is a little bit out of the norm for you. If you’re moving from one suburban house to another suburban house, what if you just moved for a couple months into a really swanky high rise that has a pool that has walkability to bars and restaurants in an urban part of town that you normally wouldn’t live in.
So you pack all your stuff up, you put it all on a pod, you send it all off to storage not to be seen again until you find a new house. But in the meantime, do something fun with it. Find somewhere with a pool, find somewhere, if you normally are living in an urban situation, maybe find a month to month somewhere out in the country for some peace and quiet for a little bit. But it’s an opportunity just to sample another type of housing, because you don’t actually have to commit to it. Thank you so much for watching. I do appreciate all of the likes comments and subscriptions. And as always, if you have any other questions, feel free to reach out.