Buying and Selling Simultaneously is a tricky process, but people literally do it everyday. I met with three home sellers last week who were just beginning to parse out this puzzle.

Here is a great article from Realtor.com that lays it out pretty succinctly. The article outlines three basic ways to make the move when you already own a home.

Option 1: Sell First then Buy

Advantages: You have a clear financial picture and know what your buying power is. You do not have to worry about interim financing. You do not have to write a contract contingent on the sale of your home. This option gives you a better negotiating position when you are on the purchasing side and allows you have a longer period to look for your next home.

Disadvantages: You have to find short-term interim housing and you have to move twice.

Scenario: I recently had a client who KNEW he wanted to the live in the Shaw neighborhood. Shaw is the current IT city neighborhood and it is definitely a seller’s market. Based on his price range and required criteria, we knew that he would need to submit a clean offer. Financially, he was unable to carry two mortgages considering the price range he needed to be in to get what he really wanted. The best option for him was to sell first. While it was a huge hassle to move twice, it was worth it to him because he was not interested in comprising on his location or required criteria. Because the neighborhood was so competitive, the seller of his home received multiple offers. He was able to win the bid by submitting a clean offer not contingent on the sale of his existing home.

Option 2: Buy First Then Sell

Advantages: You only have to move one time. This option gives you time to prepare your new house while still living in your current home. Once you have moved, you will have more time to prepare your old home for market and you will be able to keep it show ready at a moment’s notice.

Disadvantages: You will need to be prepared to carry two mortgages for at least a couple months. There is also the possibility that your current home will not sell. It decreases your buying power on the next home because the debt on the first home counts against you.

Scenario: In December of 2013, my clients bought a home that needed a gut rehab. Using construction financing, they worked on it for 6 months with a general contractor. The original plan was to put the home on market about 6 weeks prior to the completion date of the second home. However, they had two toddlers, so keeping the home show ready proved to be a true challenge. Ultimately they decided to wait until the rehab was complete. They moved out of the existing home and into the rehab. Once they were out, they spent a week with contractors getting the home ready to sell. With the kiddos out of the way, the small amount of work they put in a made a huge difference in the presentation which made all the difference. They ended up with a full price offer (on a list price that was higher than they originally anticipated) the first weekend on the market.

Option 3: Buy and Sell Simultaneously

Advantages: Does not require multiple moves. Allows you to use your full buying power and does not require you to carry multiple mortgage payments.

Disadvantages: Requires you to make offers contingent on the sale and closing of your home which reduces your negotiating power on the purchase price. Or requires that you wait until your home is under contract before shopping for the new home which gives you a very short window of time to find your next home.

Scenario: While complicated, this is surprisingly the most common. I recently had a listing in St. Louis Hills where the owner had lived in the house nearly her entire life. She was ready for a change. Not a small change but a big one. She no longer wanted a small postage stamp lot and walkable lifestyle. She wanted acreage. Buying acreage requires funds. The existing home had an enormous amount of equity in it. But rather than do multiple financial transaction to get to that equity, she decided to sell and buy simultaneously. On the day of closing the equity in the existing home was cashed out and she used the proceeds from the sale to buy/finance the next purchase.

Step One: List the house.

Step One and a Half:  Research the available inventory for the purchase (without getting to attached to any single home).

Step Two: Accept a Contract to Sell the Existing House. Ideally, negotiate an extended close date.

Step Three: Shop for the next house. Include language in the purchase contract to protect you if the sale of the existing home does not close.

Step Four: Micromanage each transaction and prepare for a whirlwind closing day.

This is just a primer. If you are thinking about moving and are wondering how to sell your house and buy the next one at the same time, call an agent (me!) and schedule some time to talk this through. There are so many scenarios to discuss. Figuring out which of these may be the best avenues for you requires a lengthy and meaty discussion. 314.541.3840