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Selling and Buying a Home at the Same Time

Are you planning to sell your current home to find a bigger space for your growing family? Have your kids moved out to leave you as empty nesters and would like a smaller, forever home? Do you have your heart set on a different neighbourhood than where you currently live? Despite the logistical complexities involved, selling and buying a home at the same time is a common goal for many homeowners.

This is when a trusted REALTOR® such as The Joan Smith Real Estate Family can be a valuable asset to help navigate the process more efficiently with fewer headaches and less stress. There are also a few key things that you should take into consideration as a homeowner, here are what we think are the 5 most important ones.

1) Preparation for Selling Your Home While Buying a Home

Most often, homeowners don’t have the financial resources to buy a home without selling their current home. However, the two transactions don’t always happen in the preferred order.

Preparing in advance is key when you are selling and buying a home at the same time. Here is what you need to know or do to get prepared.

Know if it is a
Seller’s or Buyer’s Market

Market conditions may affect your position as both a buyer and seller. In a buyer’s market, there is a high inventory of homes for sale which may help buyers in their negotiations. A seller’s market means that there are more buyers than inventory. Generally, homes may sell faster in a seller’s market and at higher prices.

The ideal market is balanced, which creates a more relaxed atmosphere in which prices are stable and sellers accept reasonable offers. For a homeowner who is selling and buying a home at the same time, gaining market insights is useful.

Establish the Value of
Your Current Home

A market evaluation lets homeowners know what to expect based on the market. Our team of experienced REALTORS® in Kanata and the surrounding communities in Ottawa can help you establish the value of your current home and the pricing strategy to get the best offers for it.

This will also help with buying a new home; You will know where you stand in paying off your current mortgage or porting it to your next home and be able to determine your overall budget.

Use the Same Agent
to Sell and to Buy

Using the same real estate agent to sell your current home and to help you find a new one will help you navigate the logistics of the timing of a purchase and a sale. As REALTORS® , The Joan Smith Real Estate Family team negotiates with both sides possession dates, terms of the sale, and contingency offers. We can help with reacting to offers quickly, whatever the market conditions. Knowing your plans can help us find a solution that works.

Get Preapproved for a
New Mortgage

When looking for a new home, it is important to know how much you can afford, especially if you want to upgrade to a bigger one. Having a current mortgage, a down payment or a higher income doesn’t necessarily mean you’ll be approved for a higher mortgage amount. Getting a pre-approved mortgage will let you know how much you can really borrow and help you find your dream home at the right price for you.

Get Your Home Ready for Sale

Regardless of the timeline, getting a home ready to sell is a complex task with many details that require careful attention. Buyers want to be able to visualize living in their new home. Decluttering and repainting in neutral colors can increase the potential sale value of your old home.

If you need to make updates and repairs, the Joan Smith Real Estate Family team has a list of recommended professional handymen who can help you refresh and fix your home before you put it on the market. Our team offers staging services, included in our listing package at no extra cost, to make your home inviting and presentable to homebuyers. Use our Home Sellers’ Guide to help you get your home ready for sale.

Looking to Sell Your Current Home and
Buy a New One at the Same Time?

The Joan Smith Real Estate Family can guide you through this process seamlessly!

2) Timeline

The timeline for selling and buying a home at the same time needs to be somewhat flexible based on your own situation. Closing on your current home can take 30 days or more. Certain factors may be out of your control, such as the buyer’s mortgage approval or other contingencies. In some cases, you may be able to set an occupancy date a few weeks past the sale.

Another important thing to consider is to include a home inspection in your plans for your own peace of mind. We also recommend having a Plan B in case your home sells first. Think about where you’ll stay whether it’s with family or friends, in a hotel or Airbnb. Also, think about where you will store your belongings between homes.

3) Selling or Buying a Home First?

It’s challenging to find that sweet spot of selling your home while simultaneously buying a home and having the timing lined up perfectly. In case you are planning to (or have to) sell your home first or buy a new one first, here is what you should know:

Selling First

Selling your current home first is usually the most practical situation. This avoids a rushed sale because you aren’t worrying about making two mortgage payments for an extended period. If you have a young and growing family, you want to be particularly conscious of avoiding the stress of two mortgages.

Likewise, if you are a retiree and downsizing, your income sources are limited, so it is helpful to sell before you buy. Selling first lets you make a stronger purchase offer. You aren’t making an offer contingent on selling your home. You know your sale profit, which lets you know how much home you can buy.

Selling first does have a few drawbacks. You may be tempted to make a rushed home purchase. There’s the possible burden of moving twice—you may have to move out of the old home into temporary housing. Then there’s the second move into your new home. Temporary housing can get expensive if you don’t find a new home quickly.

Buying First

Buying first also has its advantages. In a buyer’s market, it gives you the chance to secure the home of your dreams. You control the timeline when you aren’t worried about where you’re moving to.

Buying your new home first means that you won’t have to relocate two or more times. You can move out of your old home right into the new one. It’s more convenient because you won’t be rushed. It also gives you time to prepare your old home for sale by doing minor repairs and staging it to maximize its value and to do repairs and renovations to your new home before you move in.

The disadvantages of buying first are mostly financial. You may rush to sell your home because you want to avoid the strain of making two mortgage payments. You may not have time to wait for the best offer.

Pros and Cons of
Buying and Selling a Home at the Same Time

SELLING FIRST

PROS

  • Easier to get a new mortgage
  • Avoids the need to have two mortgages at the same time
  • Money from the sale of your house can be used as a down payment for the purchase of your new one
  • Facilitates the negotiation and purchase of your new home
  • Allows you to wait for the best offer for your current home

CONS

  • Means you will have to find a place to stay between two houses
  • May require moving twice

BUYING FIRST

PROS

  • Avoids the expense and inconvenience of relocating between two homes (temporary housing, storage, etc.)
  • Makes it easier to prepare for the sale of your old home
  • Gives you time to improve and renovate your new home before you move in
  • Allows you to rent your old property if it is not sold

CONS

  • Means you’ll have to carry two mortgages at the same time.
  • Deprives you of money for a down payment and closing costs.
  • Can precipitate the sale of your old home at a lower price.

4) Know Your Financing and Occupancy Options

A home is one of the biggest purchases most people make. When you’re selling and buying a home at the same time, financing is inevitably a huge consideration. In a perfect world, you would close on your current home on the same day you sign the paperwork for your new home, but rarely do the stars line up that well. You do have other options.

Contract contingency: A contract contingency ties the purchase of a new home to the sale of the old one. The buyer has a specified time frame to sell their existing home to finance the new one.

  • Bridge loan: A bridge loan is paid off when you close on your old house. It’s a short-term loan, generally less than a year.
  • Home equity line of credit: A home equity line of credit (HELOC) uses the value of your home as collateral for a down payment on the next home. When the home sells, you repay the HELOC.
  • Secured credit line: Similar to a HELOC, a secured credit line might use another asset as collateral for credit to buy the new home.
  • Rent-back agreement: This agreement allows the seller to live in the home for a certain period (as defined by the buyer and seller) while the home sells. The buyer becomes a landlord who receives rent and can charge a deposit. The seller is a tenant.

5) Questions to Ask Yourself

Selling your home while buying a new one can be complicated. The key is to prepare for both transactions and work with a professional real estate team to take the right steps that help you reach your goals. You’ll want a sound plan before you get started. Ask these key questions to get started:

Can I handle two mortgages at the same time?

Financially, if you can manage two mortgages for a period of time, this can alleviate the stress of both buying and selling at the same time. It’s important to consider the housing market and your financial future. If you live paycheck to paycheck, you may need to sell your home first and then buy a new home rather than trying to do them together. If the market is slow, renting out your old home may be an option.

AM I IN A RUSH TO MOVE?

Only you know the timeline for moving. If you’re moving because of a job transfer, you may be more rushed than if you are simply moving houses for more space. The more time you can allow to sell and buy a home, the greater are your chances of successfully meeting your goals.

HOW MUCH CAN I GET OUT OF MY HOUSE?

If you’re planning on using the equity in your current home to buy the new home, then you need to understand your finances. Talk to your real estate agent about the value of your home in the current market. In a seller’s market, your home may sell above its appraised value, because homes are in demand. In a buyer’s market, you may not get as much as you hoped. Buyers have more choice, which gives them leverage to offer you less.

Complete our Home Evaluation request form to find out if this is the right time to sell your house and know its current market value.

Selling and buying a home at the same time is a complex transaction. As REALTORS® in Kanata and other communities of Ottawa, The Joan Smith Real Estate Family has years of experience and can guide you every step of the way. We assist home sellers and home buyers in all neighbourhoods of Kanata and surrounding communities in Ottawa like Stittsville, Nepean, and Barrhaven. Contact us for more information.