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  • Writer's pictureMike Roberts

How to Buy a House Before You Sell

Across the country, a shortage of houses for sale coupled with strong demand has led to homes selling mere days after going on the market. Often these houses receive multiple offers and sell well over the asking price. If you must sell your existing house before you can buy, you risk losing the house you want. But there are strategies that will allow you to buy before you sell. Read on for 10 ideas.

Sell and rent while you home shop

You could sell your existing home and rent another place while you home shop. The downside is that you move twice, first to the rental, then to the home you eventually purchase.

Submit a contingent offer

An offer with a home sale contingency provides that you will purchase the seller’s home once you’ve sold yours. In a less heated market, this would be the most common way to buy before selling. But in today’s red hot market, sellers are often rejecting such contingencies because they know they can sell rapidly to another buyer. You can still ask, but don’t be surprised if the seller’s agent advises him not to accept a contingent offer.

Negotiate a later closing date

During your purchase negotiation, request a closing date far enough out that you feel confident you can sell your current home. There’s always the chance you may not be able to sell in time, but the current hot market lessens that risk, since your house may sell quickly, too.

Build a home

Rather than buy an existing home, opt to buy new construction. You will have three months or more before closing, during which your new home is being built and you can sell your existing home.

Obtain a HELOC loan

If you have at least 20 percent equity in your current home and good payment history, you may qualify for a home equity line of credit (HELOC). You can make the down payment on your new purchase using that money and take the additional time before closing to sell your existing home. You then use the proceeds of that sale to pay off your first mortgage and the HELOC. The downside risk is that your existing home does not sell before you’re obligated to close on the new home, leaving you with three mortgage payments for a period of time.

Obtain a bridge loan

Another type of temporary financing is a bridge loan. This temporary loan finances the purchase of the new home, allowing you time to sell your existing home. Bridge loan payback terms are often one year.

Use a home buying service

A variation of the bridge loan is to use a service such as Ribbon or Easy Knock to purchase your current home. This will provide you with funds to purchase your new home. The service will then sell your former home to recapture their purchase price, charging you a percentage of the sales price.

Negotiate seller financing

If the seller is willing, he could finance the sale of the home to you, with you making payments to him.

Borrow against your 401K

If you have enough in your 401K for the new home’s down payment, you could borrow it and pay yourself back with interest when your existing home sells. Before doing so, carefully research the rules your employer and the fund custodian firm impose on such loans. The downside of this approach is that if you do not pay back the entire amount with interest, you could end up owing significant taxes and penalties.

Negotiate a leaseback

Say you’re ready to sell your home and have found a buyer who wants it, but you haven’t yet found a new place to live. Perhaps you can get the buyer to agree to let you lease the property you’re selling for a short time after closing in order to give you time to find a new home.

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