When you’re stuck in a situation where you need to buy and sell at the same time, it can be difficult. You can’t buy a new home if you haven’t sold your old home because your down payment is tied up in the equity. Here are a few ways to deal with this situation.
If you can get a little luck on your side, you might be able to pull off buying at the same time you sell. You may be able to sell your home and agree that the new buyer will give you a specific amount of time to find and buy your next home before they move in.
However, having perfect timing is difficult and you really don’t want to buy a new home before you sell your old home, in most cases. Buying first makes it harder to qualify for a mortgage and it could mean paying two mortgage payments each month until you sell your home. If you can afford this, it might work, but if not, you really want to sell first.
Sell and Rent Before Buying
A more common route for homeowners to use when they need to sell their home in order to have a down payment for the next home they buy is to sell and rent temporarily. There are several ways you can pull this off. You can use an Airbnb while you search for your next home or you can find a month-to-month rental in the area you will be searching within.
The key to this strategy is to make sure you don’t spend your down payment in the process. It can also cause a sense of urgency to buy since you’ll likely be stuck in a smaller space than you’re used to and it won’t feel much like home.
Using the Ribbon Concept
Another possibility for those preferring convenience over saving money is known as the ribbon concept. A company, such as Ribbon Home will buy the home you want to buy for you. Then, you will rent it from them until you sell your current home. You will pay a 2% fee for their services and you’ll have to pay rent and a mortgage until you sell your home, but it makes buying and selling at the same time a bit easier.
When your down payment is tied up in your current home it can be difficult to figure out what to do. These three strategies offer a solution and while it may seem like a pipe dream to have perfect timing, the right real estate agent can help you negotiate the time you need when selling and help you find the right property when buying.
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