Buying a new house before selling your own house or condo in cities like Oakland, Berkeley, and Alameda can be a challenging process.
Yet, who doesn’t want to avoid moving twice?
To buy a house before selling there are many factors to consider, including:
- financial planning to know what you can afford
- deciding if it’s worth the loan expenses and constraints
- finding the right property,
- managing the logistics of two real estate transactions at the same time
- determining if your house and everything that’s in it will help or hinder you getting the highest sales price possible
One of the biggest challenges of buying a new house before selling your old one is managing the financial aspect of both transactions. If you have enough money to cover both mortgages simultaneously, this may not be an issue.
Here are some things my clients, their lender, and I (their agent) consider when figuring out if buying before selling makes sense.
Consider 3 options for selling your house and buying a new one
1) Loan to help you buy a new house before selling, if you have a lot of home equity
Bridge loans are what most of us think of when it comes time to buy before selling. The easiest way to think about this type of loan is that it bridges the time and funding between a current home and a new one.
Crosscountry Mortgage describes a bridge loan as “a second trust that is collateralized by the borrower’s present home allowing the proceeds to be used to close on a new house before the present home is sold.”
Bridge loans can have certain requirements as far as how many payments you need to make and how many points you need to pay.
In other words, bridge loans can be expensive.
There’s an alternative to bridge loans. A “cross-collateralized” or wrap-around loan. “The new loan pays off the existing home’s first mortgage and finances the purchase of a new home (both the old and the new home are tied to the mortgage as collateral).” as explained by JVM Lending.
It is essential to speak with a financial advisor or mortgage broker to determine what options are available to you and which will be the most financially viable for your situation. (Here’s more about bridge loans from JVM.)
2) Wait until you have a buyer for your current home before beginning the search for a new one.
If you believe you will be in a good position to buy once your house sells, consider not buying first.
Instead, you might require a rent-back agreement with the new owners of your old home.
In 2023, a number of my buyers have offered rent-backs to sellers who needed to complete their new home purchases before moving. It can be done — without the seller becoming a “tenant.”
Case study: My clients got into contract on a home where the sellers had already identified the house they wanted to buy. Their pre-approval was all set up on the new house which gave the buyers of their old house assurance that they would definitely be leaving once the deal closed. The sellers would just need a couple of weeks to get moved out after their house sold.
In California, the rent-back uses a legal form, called “Seller in Possession” that allows the seller to stay in their current home for a specified period after the sale, giving them time to find and move into their new house.
This can be a good option if a seller needs extra time to complete renovations or if you have children in school and don’t want to disrupt their education — as one seller arranged with my buyers in San Ramon this year.
3) Move before selling your house (This has a few benefits and can be worth the hassle!)
Despite the option to stay in your home while it’s on the market, there is a good case for moving out.
1. Professional home staging is a proven way to maximize a house sale price.
The National Association of REALTORS® published results of an agent survey in 2023 that makes a strong case for moving so your house can be staged.
Staging a house is just as important as a good cleaning, painting, and landscaping for curb appeal. The facts:
- Almost half of sellers’ agents (48%) reported that home staging decreased a property’s time on the market.
- 20% of both buyers’ and sellers’ agents said home staging increased the dollar value offered by between 1% and 5% compared to similar homes on the market not staged.
- Staging the living room was found to be most important for buyers (39%), followed by the primary bedroom (36%) and kitchen (30%).
2. Showing a vacant house is easier for buyers’ agents.
On vacant houses for sale, Bay Area listing agents often will provide a blue “SUPRA” lockbox for buyers’ agents to access a property. The SUPRA lockbox ensures only active, licensed real estate agents can get the key to a house for showings.
There really is nothing better than the ease of using an electronic keypad to show a vacant, staged house any time between 8am and 8pm. Such a lockbox naturally leads to more agents showing a house that’s for sale.
Because our real estate markets tend to have strong demand, especially in the $750,000-$1,500,000 range, it’s easier to sell as an owner-occupied home than in other places.
Unless your house is totally spectacular, you as a seller need to be totally flexible to get as many buyers in as possible. For example, you should be willing to have only 1-2 hours notice to leave their house before a showing. If you can plan a couple of weekends away to allow for a few open houses, that’s even better.
Even so, the pressure to coordinate schedules with those of busy buyers makes it far easier to skip showing a house (unless a buyer specifically has asked to see it, of course).
3. You can get to know the area you’re moving to by renting for a few months before buying.
Moving doesn’t have to be all negative. After all, instead of setting down roots immediately buying a new house in a new place, renting lets you test the waters.
Plus, moving is a good chance to finally get rid of all that stuff you’ve been meaning to get rid of. (The Buy Nothing groups on Facebook and Nextdoor as well as “free” on Craigslist are fantastic ways to move the merch.)
If you can use PODS, it’s the simplest way to move.
PODS let you load up a storage “pod,” keep it stored, then have it delivered to your new home for unloading.
With some careful planning, flexibility, creativity, preparation, and hard-working real estate agent and lender, it is very possible to successfully buy a new house before selling your own.
Ask me for introductions to a financial advisor or mortgage broker to determine your options and craft the best strategy for your situation.
With some patience and perseverance, we will find the perfect new home while still managing the sale of your old one!