Successfully selling a home and buying a home are significant accomplishments on their own, but when their timelines cross it can be difficult to manage both. If you’re thinking about doing both simultaneously, it’s equally important to understand the steps you can take to make the process go smoothly as it is to have a backup plan in case it doesn’t. Above all, the balancing act required to pull off both deals highlights the importance of working closely with a trusted and experienced real estate agent.

Do I buy or sell first?

One can imagine a perfect world in which the two transactions go through one right after the other. However, this is not usually the case. So, should you list your current home first or start by putting in offers on a new one? There are pros and cons to both.

Selling your current home first allows you to make offers on a new home with cash in your pocket, increases your buying power, and avoids having to juggle two mortgages simultaneously. On the other hand, it creates a gap of residence, often leaving homeowners wondering where they’ll stay until they move into their new home or whether they may need to rent before they can buy again. Sellers may also negotiate a rent-back agreement with the buyers, allowing them to rent the house from the new owners before they move in.

Buying before selling solves the need for any temporary housing and makes the overall moving process much easier. Having a residence established ahead of time means you’ll only have to move once, which can save you some serious stress during this time of transition. Oppositely, buying a new home before you sell your current one will put an added strain on your finances. Having two concurrent mortgages equates to taking on more debt, which could result in less-than-favorable loan terms for purchasing your new home. Without the lump sum generated by a home sale in your pocket, coming up with enough money for a down payment may be a challenge and obtaining private mortgage insurance (PMI) may be in the cards. Finally, buying before selling comes with an obvious assumption—that your current house will sell.

Ultimately, the order of operations depends on your situation. Perhaps you’re moving due to a change of employment, and you need to direct all your energy toward buying a new home by a certain date before you can even think about selling your current one. No matter which route you take, it’s important to communicate your timeline to your listing agent or your buyer’s agent so they can strategize accordingly.

Buying and Selling a Home at the Same Time 

Local Market Conditions

Buying and selling at the same time will come with a certain duality: at each step in the process, you’ll have to balance your responsibilities as both a buyer and a seller. For example, when assessing your local market conditions, you’ll be looking at not one, but two housing markets.

• Seller’s Market: Selling in a seller’s market means that that you’ll need to be prepared to move once you list, since you could be looking at a short selling timeline. However, relying too heavily on the assumption that your house will sell quickly could make things dicey down the road. If you’re buying in a seller’s market, finding a new home may take longer than expected. You could potentially be waiting weeks or months for an offer to get accepted.
• Buyer’s Market: Selling in a buyer’s market typically means that homes stay on the market longer. If you proceed with a new home purchase just after you’ve listed your current house, know that it may take a while to sell. If you’re buying in a buyer’s market you can afford to be picky, knowing that time is on your side. With fewer people buying homes, sellers will be more flexible, giving you leverage to negotiate your contingencies.

Having a Backup Plan

If only you could wave a magic wand and make both transactions go through as planned. That’s why it’s important to have a backup plan in place to right the ship should things go sideways at any point in the buying or selling process. Talk to your agent about which options may be right for you. Here are a few:

• Sales Contingency: Buying your new home with a sales contingency allows you to opt out of the purchase contract if your home doesn’t sell by a specified date. Purchasing contingent on the sale is rare in highly competitive markets.
• Bridge Loan: If your current home hasn’t sold yet and you’re not able to afford the down payment on a new home, a bridge loan may be a fitting solution. Bridge loans can be used to cover the down payment on a new house and are repaid once your existing home has sold.
• Rent-Back Agreement: A rent-back agreement is a clause in the sales contract that allows the seller to rent their old home from the buyer for an agreed-upon period of time before the buyer moves in. This can be especially helpful in situations when the seller is having trouble finding a new home.

Just like so many parts of life, the real estate market was greatly impacted by the Covid-19 pandemic. From mass unemployment and reduced listings to high demand for houses in contrast to low inventory, the real estate market is much different than it was two years ago.

With high housing prices, low interest rates, fluctuating mortgage rates, and financial strain on homeowners, the current market is bound to make anyone’s head spin. 

Inventory

In the spring of 2020, house sales were lower than many had seen in over a decade. Fewer people were trying to sell their homes, and many homeowners pulled their listings due to the uncertainty that came with trying to sell in the middle of a pandemic. Initially, the low inventory of houses was not a major issue, as it was matched by lower demand.

Low inventory became troublesome as demand grew, as there were (and still are) significantly fewer homes on the market compared to pre-pandemic times.

Housing Prices

Since inventory and demand for houses were relatively well-matched in the beginning months of the pandemic, housing prices didn’t drastically rise or drop. As mentioned above, this didn’t last for long, and the demand soon grew at a much faster rate than the number of homes for sale. 

During the summer of 2020 and beyond, demand actually rose to above pre-pandemic levels, and the inventory of houses stayed about the same. This caused housing prices to steadily rise, and the average asking price on new listings is now undeniably higher than we would have seen pre-pandemic. 

Mortgage Rates

Though listing prices are higher, many home buyers are receiving lower mortgage and interest rates than they might have received before the pandemic. With many homeowners unemployed and unable to keep up on mortgage payments, mortgage forbearance programs (pausing or reducing your mortgage payments) and moratoriums on foreclosure proceedings have been put in place to keep foreclosure rates low. 

As these programs come to an end, inventory may grow as a result of foreclosures and increased listings from people that decide they can no longer afford their house. This is another factor that will affect the constantly changing mortgage rates.

New Home Construction

As the inventory of existing houses remains low, new construction will become a more popular option for prospective home buyers that have the means to make it happen. Additionally, interest in new home construction may steadily increase as families rethink exactly what they want out of a house after spending so much time inside during the pandemic. 

Unfortunately, new construction projects may run into delays as covid-19 slows down many processes including getting permits, conducting inspections and appraisals, and the construction itself.

Trends in the Stanwood Camano Area

Our local market continues to change regularly. The Stanwood and Camano area is unique and you cannot always depend on larger market reports to reflect our local trends. To help both buyers and sellers navigate those changes we prepare a monthly, in-depth report into the trends of our local market. This report includes key statistics, like listings sold by price point or the number of days on the market, and empowers our agents and our clients with the most up-to-date and relevant information.

So, is it the right time to buy? Buying a home can be overwhelming at the best of times, and Covid-19 certainly makes things more complicated, but that doesn’t mean it’s not feasible. The bottom line: It’s the right time to buy if you’re ready for it!