Caught in the Middle? How to Buy a House While Selling Your Old One

Clients often ask me if they can buy a home when most of their cash is tied up in the equity of their current house. This is a very common situation. You bought your starter home, but now you’re a little more financially fit and ready for a bigger house, or a larger lot, etc. Or maybe it’s just the opposite, you want to downsize, don’t need to be near town anymore if you’ve retired or move somewhere warmer. Either way, it often creates the challenge of wanting to purchase a new home, but needing the funds from the sale of your existing home to make that happen.

While this can feel overwhelming, it’s not impossible. But is important to understand all the moving parts and have realistic expectations. Here are my tips.

If you can make an offer on the new place without it being contingent on a sale—Do It, but please read the rest first.

There are two parts to this. The logistics and the emotion. Many buyers assume they need to sell their current house in order to qualify for a new mortgage. That might not be the case. It’s worth talking with your lender to see if you would qualify for a new mortgage without selling first.

Which leads to the second part, and most import part, can you stomach it? In this scenario, you would list your house for sale and make an offer on the house you want, but the purchase would happen whether or not the sale did. So, if your current house sold right away you could still use the proceeds towards your purchase. The risk you take is that you might not get an acceptable offer right away on your current place. Are you the type of person, that the stress of that unknown will be too much? Then do not do it. But if you’re up for it and it won’t keep you up at night, it does make your offer more competitive on the new place. Because it won’t be contingent on a sale. You can certainly minimize your risk by working with your agent to make sure the house you’re selling is priced correctly. Be thoughtful about any recommendations your listing agent gives you to help it sell quickly. For listing tips read, Put Your Best Foot Forward.

If you can’t qualify for a mortgage on a new house while owning your current one or don’t feel comfortable, what do you do? First, meet with your agent, listen to their advice and get your house on the market. When you are ready to make an offer on a new house, sellers will not take you seriously if yours isn’t for sale yet.

Now the hard part, I recommend waiting a week or 2 after new listings on the market before you set up a showing to see it. Listen to your agent’s recommendation on this, but in most markets if a house has 10 showings the first week, you will not be competitive with an offer contingent on a sale. If it’s still available in a week or so, set up a showing to see it.

Be prepared to pay full price. You’re going to have to give the seller a reason to think you’re worth waiting for (waiting for your house to sell). Since your terms are likely not what the seller is hoping for, your price needs to be. My rule of thumb is if you there is a deal breaker item you must ask for (in this case a contingency to sell first) ask for as little else as possible. That means don’t also ask them to paint the deck or include the swing set or allow early occupancy. The less you ask for the more likely they are to accept your one condition. The one condition you need to make this work.

Ultimately, keep an open mind. You may end up finding a house that suites all your needs but hasn’t had cosmetic updates since 1973. If it meets your other needs (size, location, etc.) consider it. Because the lack of updates may be the reason it’s still available for you.