Selling your home feels like a balancing act. Trying to perfectly time your home sale while also searching for a new home is tricky. If you’re lucky, you’ll be able to move into your new home and have a perfectly staged empty home left to land the sale. However, if you’re in a hot market, your home might sell before you have a chance to find a new one.
What are you to do if you’re put in this in-between situation of having sold your house without a new one to go to? While the first line of defense is to avoid this situation in the first place, sometimes it’s out of your hands. Unless you sell your home first, you’ll likely need to qualify for two mortgages, not to mention the second down payment. This isn’t always possible, so you need a game plan for what to do when you can’t find a home before yours sells.
In a perfect world, your closing dates for buying and selling your home would line up perfectly. Of course, real life is rarely this lucky. A way to line up your dates is by asking to add a contingency to your contract. This is possible in both buying and selling situations.
For example, if you’re buying, you can ask the seller to make your purchase contingent on the sale of your home. This is more likely to be effective if you’re having a difficult time finding a home buyer. You’ll need to be prepared with reasons for why you believe your home will sell quickly, and this is something your real estate agent can help with.
On the other hand, if you’re selling, you can negotiate with the buyer. You can ask to add contingency to your contract that makes your closing date line up with that of your new home. This will depend on how flexible and interested the buyer is in your home.
A rent-back arrangement is when the new buyer agrees to rent out the home for a short time after you sell it. These rental periods are generally short amounts of time between 30 and 90 days depending on when you find a new home.
In order to come to this type of agreement, you’ll either negotiate a lower home price or pay rent to the new owner. Unfortunately, not all mortgage lenders allow this, so you’ll need to check with the new lender before coming to this arrangement.
Of course, a rent-back arrangement is less complicated than having to find other housing while you wait for your new purchase. For buyers already using your home as an investment property for renters, this can be an easy agreement.
If you’re buying a home and selling a home at the same time, you can get a short-term loan to help cover these costs. This type of loan is called a “bridge loan” since it bridges the gap between the sales price of the new home and your new mortgage.
You can use bridge loan funds to make any down payment or closing costs on your new home, and you can repay this loan once you sell. This is a helpful tool for putting your home on the market without worrying about the finances of buying and selling.
Finally, if all else fails and you still sell your home before your move-in date, you should consider alternative housing options. The best-case scenario is moving in with family and friends temporarily. If that’s not possible, consider a short-term rental in the meantime.
Your real estate agent will be able to assist you in finding a compromise in this situation. Depending on your market, it might be affordable to rent for 3-6 months prior to moving into your new home. This frees up your attention so you can focus on finding the right home for you and your family.
It’s not always possible to perfectly line up the dates when it comes to buying and selling your home. Avoid the stress of finding yourself without a place to stay during the home buying process with these tips above. Knowing your local real estate market as well as your options will help you best create a plan of action.