How to buy another house before selling yours

It’s time to move on from your current home, but you want to do so with minimal disruption to your life  — no temporary housing, no moving twice. In other words, you want to buy another house before selling yours.

But the path to doing so might not be as clear as you’d hope it to be, so we broke down your options below.

Can I buy another house before I sell mine?

While it’s possible to buy a house before selling yours, traditional real estate doesn’t make it easy. As a homeowner in this position, you’ll have to wade through contingency and financing hurdles, or instead choose to sell your house before buying a new one.

But the real estate industry is changing. New solutions from power buyers  — real estate tech companies who focus their services on homebuyers  — can help you buy before you sell or do both simultaneously with ease.

Should I buy a house before selling my current one?

Even though you can buy a new house before selling your old one in traditional real estate, that doesn’t necessarily mean you should. Homeowners who choose to buy a house before selling should be prepared for the following.

Less than ideal rate-and-terms on mortgage

When you apply for a mortgage on your new house, the mortgage on your current home will count towards your debt-to-income ratio (DTI). This ratio is an important metric that lenders use to determine your financial health. Having a higher DTI could mean higher interest rates on your home loan, making your new mortgage more costly.

Learn more about qualifying for a mortgage before you sell.

High upfront costs (without proceeds from your home sale)

Most homebuyers need 3% to 20% of the purchase price of the new home to put towards a down payment, plus another 2% to 5% of the purchase price for closing costs. That’s a significant amount of money, especially without the proceeds from your home sale. 

If you choose to buy before you sell, you’ll need to have that money saved or apply for bridge financing.

Pay two mortgages at once

Until your old home sells, you’ll have to pay the mortgage for both homes. While this may be doable for a short period of time, it’s not sustainable in the long run for most. 

It takes an average of 64 days for a house to sell. Homeowners who choose to buy a house before they sell should be prepared for two months of overlapping mortgage payments at a bare minimum. 

3 benefits of buying a house before selling

Despite those obstacles, the appeal of buying a house before selling is compelling: You can move into your new home right away and avoid the headache of lining up your timeline with that of the person buying your home and the person selling you your new one.

It also comes with these lesser known, but equally important benefits.

You won't need to find temporary housing

There's a good chance that your living situation will be in limbo if you sell your current home before locking down a new one. You may end up staying in a hotel, a short-term rental, or with extended family — none of which is ideal — and potentially lose money in the process.

However, if you buy before you sell, you’ll be able to search for a new home in the comforts of your old one, and can move into the new one immediately.

Learn more about where to live between buying and selling.

You won't have to settle

Being stuck in a temporary living situation can be uncomfortable, and it's no surprise that most homebuyers would want to get out of it as soon as possible. When people sell their house first, they may feel pressured or desperate to find a new place, especially if they've been looking for a new home for a while. 

If you decide to buy before selling your existing property, there is no rush. Since you’re not tied to a timeline, you can do a thorough search for your dream home on your own terms. 

Learn how to find a house before it hits the market.

You won't have to accommodate showings

On a practical note, buying first means that you won't have to worry about home showings. Typically, putting your home on the market means having to get out the door any time a prospective buyer wants to tour the property. This process can be a hassle, especially if you're juggling multiple people's schedules and time commitments.

When you've already moved into your new house, your current property will be vacant, which means that it will be much easier for real estate agents to schedule a showing or open house.

You won't have to rearrange your schedule to let prospective buyers through the door, and the ease with which your real estate agent can show your house will also help sell your house sooner.

3 ways to buy a house before selling yours

Now that you have a better idea of why it makes sense to buy a new property before selling your existing home, the next step is to talk about the practical aspects of how to make it work. Generally, there are three main ways that people buy a home before they sell, and one of them might work for you.

Option 1: Make a contingent offer

A common way of facilitating buying and selling a house at the same time is by making an offer that's contingent on the sale of your home. When you ask for a home sale contingency in the contract when you buy a house, it states that you agree to buy the new property if, and only if, you can find someone to buy your current home within a certain period. If you can’t find a buyer for your existing home, the contingency clause gives you the right to walk away from the new house.

While this may sound convenient and ideal, sellers don't love contingent offers. Making one can put you at a disadvantage in a competitive market if other buyers are ready to buy or come to the table with cash offers.

Why are sellers skeptical of contingent offers?

In a seller's market, competition is fierce — the sale prices for available listings are often well above the original asking price. In fact, people will submit offers that waive inspections and cushion appraisal amounts just to make their offers stand out from the crowd.

In contrast, including contingencies in your offer creates more work for the seller, with little upside. If the seller has other offers in hand, it’s unlikely that they will consider yours if it includes a home sale contingency.

That said, if you want to make your offer stand out, one thing you can do is make a cash offer. If you don't have the cash on hand to go this route, Orchard's Offer Boost option allows you to use the company’s cash reserves to make an offer on your new home. Then, once we help you sell your home, you pay us back with zero interest.

Get started with a free estimate of how much your home is worth. Orchard valuations are 30% more accurate than leading estimates.

Option 2: Get a bridge loan or home equity line of credit

If you don’t have the cash on hand to buy a new home before getting the equity out of your old home by selling it, you can seek help with additional financing.

You can take out a short-term loan called a bridge loan to make the down payment on your new home. Then, when you sell your current home, you use the proceeds from the sale to pay it off. If your home doesn’t sell, or takes longer to sell than expected, then you may have trouble repaying the bridge loan, which typically has higher rates than your standard mortgage.. 

You can also buy another house before selling by taking out a home equity loan,  which is a loan against the value of your current house, or a home equity line of credit, which functions similarly to a credit card. But if your home doesn’t sell, you’ll be responsible for two mortgage payments (the old house and the new house) and the home equity loan.

Read more about bridge loans vs home equity loans.

Option 3: Use a power buyer service

Modern brokerages, like iBuyers and power buyers, offer another solution by pulling your equity out of your current home before you sell it, so you can use that money to buy your next home.

For example, Orchard allows you to tap into your home equity and use that to buy a home, which means that you can submit a contingency-free offer without taking on any extra debt.

Here's how Orchard works: We give you up to 90% of your home value upfront to put toward your new home purchase, and guarantees the sale of your old home. Once you buy your new home and move out, we help you get your home ready for sale and listed on the market. If your home sells for more than the guaranteed sale price, you'll receive the difference.

Services like these allow you to "sell" your home before you truly sell, and you don't have to break into your savings or investments, or take on a second mortgage.

When you buy before you sell with Orchard, you'll have a competitive advantage

In today's seller's market, housing inventory is low and demand is high. That makes it hard for a prospective buyer to find a new home. Available listings will have multiple offers, and the final sale price will go far above the original asking price. 

While the competitive market can be exciting as a home seller, it's frustrating as a buyer. Since so many people are competing over the same listings, it can take a while before you submit an offer that gets accepted. Prospective buyers could end up touring properties for months before they finally buy a new house.

Not having to sell your home first before you put in an offer on your dream home, or not having to make an offer contingent on finding financing, means you can make a competitive offer on a new home as soon as you find it.

Can I buy and sell a house on the same day?

It's not common for people’s timelines to align, and one hiccup with selling your home can make it almost impossible to close on your new home the same day.

Buying and selling a home at the same time would, in a perfect world, give you the chance to turn your proceeds into a down payment, without wasting any time moving to a third location, like short-term rental.

When it comes to the real estate market, this is easier said than done. The homebuying and selling process gets complicated, since so many pieces need to fall in place simultaneously. Between mortgage approvals, home inspections, and timing between all parties involved, it can be difficult to coordinate, even if you ask for an extended closing.

But when you work with Orchard, we’ll line up the dates so it feels like one seamless timeline. Get started today.