Real Estate Musical Chairs

April 25, 2025 8:10 pm

Buying a Home While Also Selling One is Doable if you Have a Plan

A tangled problem, but a common one: You own a home that you must sell in order to buy your next home. How do people manage that?

There are several ways to approach the problem. Spend some time with it. Think and talk through the options. That is actually an important step, because each potential path carries its own benefits and risks. Ultimately, you need to choose one of the paths. Here are the common strategies:

Sell Your Current Home First

In this option, you sell your existing home before purchasing a new one. This puts the home equity from the old house (hereafter the “departing property”) into your bank account where it can serve as a down payment on the next home. That increases how competitive you can be in making offers. Not only can you show more cash on hand, your offer will not be contingent on the sale of another property, which is much more attractive to a seller than an offer that IS contingent. This strategy has an added benefit of allowing you to take your time finding the next home. And finally, it eliminates the risk of ever making two mortgage payments!

Cons: You’ll need to move twice. You’ll also need to make arrangements for where to live during the home search phase. Most landlords are looking for 1 year lease terms, and staying with friends or family can be challenging.

Sell Your Current Home First – Leaseback

This option resembles the previous option except you strive to rent the departing property from the new owner. This option can work well, but it relies on finding a buyer who does not need to move in right away! In a very competitive market, it is possible to line up such a buyer. Your Broker needs to broadcast your desire to rent to buyer Brokers. It is not out of the question that one or more of the buyers could offer a leaseback/delayed possession after closing. We have put deals like this together for clients over the years. It’s good to have a backup plan in case none of our buyers is willing to delay the move-in. Backup plans might include an alternative place to move, or just lining up a house to buy right away!

Buy Before Selling

This option is a breeze logistically. Buy a home you like and move once! You can list the departing property while waiting to close on the new home or simply wait until the house is vacant, maybe stage it, then list it. The latter option even avoids dealing with showings while you are living in the house

Cons: There is a risk of double payments. You get a grace period on the new purchase before you must make that first mortgage payment, but I can tell you from personal experience that if the departing property does not sell right away, you might get stuck making mortgage payments on two homes every month for a time. The anxiety can even lead you to accept a lower offer than you might have otherwise, just to stop the bleeding. You also need to get qualified with a lender to purchase while still owning your departing property, which requires solid credit, income and perhaps even a down payment on hand.

Buy Before Selling – Heloc

If you don’t have the money or qualifications to accomplish the previous strategy as described, another option is to get a home equity loan on the departing house. Provided you have enough equity, you can utilize funds from that loan as a down payment for a new purchase. Currently, we know of a program where the lender doesn’t even count the debt on the departing property when evaluating your qualifications to purchase.

Cons: Like the first example, this still brings the risk of double payments. It also requires significant equity in the departing property.

Buy Before Selling – Contingent Offer

Here you make an offer on a new home that is subject to you being able to sell your departing property which has not yet been listed for sale. This method totally eliminates the chance of owning two homes at one time.

Cons: Finding a home where the seller will accept a contingency can be a needle-in-the-haystack scenario. Sellers don’t like contingencies because having to sell another property before moving forward on theirs is one more “IF” in the way of the finish line… a pretty large “IF” at that. In a competitive market like Tacoma has been for most of the last decade, a contingent offer can be a non-starter! If the seller has a pile of offers, there is a special pile for contingent offers… It’s the pile that never gets looked at! Another downside is that you really must be ready to list the departing property right away. According to our local contract language, you’ll only have five days to list it for sale after a contingent offer is accepted.

Rent Out Your Current Home

Here, instead of selling, you convert your existing property into a rental investment and purchase a new home. The greatest aspect of this plan, IMHO, is the long term investment of owning real estate. Although real estate values occasionally go down, they mostly appreciate over time. Real estate is a leveraged investment (assuming you have a mortgage), so the return on your initial down payment tends to be very favorable.

Cons: You will be a landlord which requires acquiring new knowledge and skills, especially in a place like Tacoma where the laws are very complicated for landlords. You also must qualify for both mortgages.

In the end, buying and selling at the same time might feel like a high-stakes game of musical chairs-but with the right plan (and a thoughtful real estate broker on your side), you’ll get through it. There is a strategy for every situation, and a little prep can save a headache later.