Though buying and selling a home at the same time may sound simple (you buy, you sell), this process is really two complex transactions merging into one.
The entire ordeal becomes more of a dance—a fox trot, not a waltz! It requires incredible coordination and movement to work effectively without tripping or stepping out of rhythm. And the consequences if you do, well, they’re monumental. We’re talking about hundreds of thousands of dollars here (not to mention a roof over your head!) — no pressure.
So, how do you do it? How do you buy and sell a home in the military at the same time? And what are some effective tips for success? Follow along was we dive deeper into the topic.
The market has a lot to do with how you'll sell, then buy a home. Whether it’s a buyer's or seller's market influences which method assumes more risk and which offers cushion and safety.
The 2021 market is a strong seller's market so far. Not only are properties not staying on the market long, but they’re going for high prices, too. Great news for when you sell! As we plunge ahead into 2021, we see many of the same trends that the COVID pandemic initiated last year:
- Low interest rates: Those favorable mortgage rates we all saw pop up mid-2020? They’re still here!
- High prices: Low inventory and lots of interested buyers set the stage for higher home sales—yay for home sellers!
- Low inventory: Homes are selling faster than new ones can pop up.
- Coronavirus: Despite all of our hopes and prayers, the pandemic is still here. And though the vaccine is becoming more readily available, we’re still noticing a few of the trends that started last year. For example, many city dwellers continue to seek distance and space. We see a few of the major metropolitan areas, like San Francisco, keep lower prices while the surrounding suburbs maintain healthy, generous asking prices.
Tips for Buying & Selling a Home at the Same Time
You get the concept, now how do you make it happen? There are a few ways to go about it:
1) Buy first, then sell.
This route assumes higher risk, as it involves owning two houses at once. Not only that, but it requires you to qualify for two mortgages and provide proof that you can support both at the same time. It’s often doable, but can add strain and stress to securing a home buyer for your current home.
Having said that, 2021 is a seller's market. So while buying first and then selling is riskier, it might not be as risky in the current housing market.
Another factor when choosing this order of events is your finances. Home sellers typically use a home sale to help budget for our next real estate purchase. Well, that among other factors like Basic Housing Allowance, debt, local pricing, etc. But you might have to base your budget off your estimated home value versus what you make at closing. While this shouldn’t be a deal-breaker, it does need to be addressed.
2) Time everything without contingencies.
In a seller’s market, you need your offer to stand out. Anything that appears tedious, slow, or risky won't catch the seller’s attention. With a stack of offers laid out in front of them, the seller will go for the highest offer with the fewest contingencies. To avoid writing an offer with a contingency to sell, work the timeline to your advantage.
How? Typically, you'd wait until your buyer is fully approved by their lender, ensuring that they can, in fact, afford to buy your home. Elizabeth Weintraub at the balance shares,
“If you and your real estate agent are confident the buyer will follow through with buying your home, you could delay the closing to close concurrently with the date you close on your new home.”
Of course, this requires patience on the buyer's side and a slight risk for owning two homes at once should they choose to pull out.
3) Buy with a contingency to sell.
As mentioned, an offer without contingencies is your best bet to stand out. However, a popular option in normal times is buying with the contingency to sell. This means that closing is dependent on finding a buyer for your current home. This mitigates the risk associated with buying first before selling, as you don’t have to follow through with the purchase until your home has a buyer.
Note: Using this method is best applied in a buyer’s market when the seller has fewer options and might be forced to exercise patience.
4) Sell first, then buy.
Military families will likely be moving on PCS orders after their home sells. But let’s say the timing doesn’t line up. Especially now, your house may sell much more quickly than you anticipated. You may still have a couple of months between closing and when you need to report to your next duty station.
Thankfully, there are some options so you don't miss the opportunity to get top dollar for your home in the current hot seller's market. This would be the time to explore short-term rentals while you store your household goods or do a rent-back (see below).
5) Rent your home back after it sells.
Just as it sounds, some home buyers and sellers work out a deal when the timing doesn’t line up perfectly. It’s called a rent-back contingency and allows you to rent your home from the buyer for a set amount of time.
While this isn’t the most popular option for homebuyers (you can understand why), it can be a life-saver for you should you close before your next report date.
Tips for Success
Now, how do you pull off this great buying and selling a home at the same time magic trick?
1) Consider your finances.
There are so many things to consider when buying or selling a home. Put the two transactions together, and you have a complex equation. You have to consider all sides and run the numbers.
Related: Get Your Finances in Order Before Buying a Home
Things to factor in your budget:
- Basic Housing Allowance. As we've mentioned frequently on this blog, your BAH is not your budget. You make your budget. However, it’s a huge factor. Your BAH is a fairly accurate representation of the cost of living and how much you should be spending on housing at your duty station.
- Your current home’s value. How much you make on your home sale doesn’t necessarily tell you how much to spend on your next home, as the cost of living fluctuates from duty station to duty station. But, it can indicate where your finances need to go. For example, if you make enough money on your sale to pay off the debt you’re working so hard to kiss goodbye, then you might be able to re-allocate those funds to housing at your next duty station instead of funneling it toward student loans, car payments, etc.
- Mortgage rates. Qualifying for a home loan is a solid start to understanding how much house you can afford. While you shouldn’t jump to spend as much as you're approved for, it certainly puts a cap on your spending and helps you narrow your search, and gives you an idea for your monthly budget.
2) Have a back-up plan (or two!).
Let’s be honest. Things rarely work according to our plan. The military has taught us that countless times already! So the key to avoiding utter chaos when buying and selling a home at the same time is to have a back-up plan.
For starters, let’s say that your home doesn’t sell. The most common alternative is to rent it out instead. Becoming an accidental landlord might not appeal to you, but it could be a blessing in disguise.
And if you sell your home and don’t yet have one to buy? As mentioned above, storing your household goods and renting a month-to-month apartment or selling with a rent-back contingency may allow you the time you need before making the trek to your next duty station.
3) Work with an experienced agent.
Whether it’s a For Sale By Owner or you're working with a real estate professional, we’re all about successful real estate transactions here at MilitaryByOwner! When you’re juggling a dynamic transaction like buying and selling a home at the same time, hiring a real estate professional, specifically a Military Relocation Professional (MRP), could be your best asset.
As award-winning Virginia REALTOR® Jennifer Hernandez notes:
"The best move you can make is to find a Realtor who understands the Military PCS lifestyle, especially one who fully understands the entire VA loan process and how to compete against other types of loans. Also, find a Realtor who can find lending partners that offer better deals. It is not just lower mortgage lending rates; you also need to look at fees.
A VA-savvy/military-friendly Realtor is essential when you are buying a home in an unfamiliar market, especially now as the real estate market heading into 2021 is very fast-paced and much more fluid. There are many undercurrents that your Realtor can explain. Most of this information is not easily accessible to the public. Plus, military-friendly Realtors can provide you with information on schools, safety, traffic, and neighborhood activities to help you make a better choice for your entire family. "
This topic offers a lot to digest. With so many variables, there’s no way to tell you exactly how it will go. Take a look at these options to brainstorm and make the best out of your situation! But whether you're selling your current home or finding your next one, we’re here.
Use MilitaryByOwner to find homes for rent or sale near your next duty station and get yours listed with one of our advertising packages to attract the right buyer!
