Buying a home and selling another at the same time. What to do?

A common problem when buying a home is the question of what to do with the existing one. This isn’t a problem for first-time buyers, of course, but if you’re moving up to a larger house or moving to a new location, you’ll run into this problem eventually. It would be great if your existing house and mortgage would simply disappear once you decided to buy another house, but that never happens.

So what do you do when faced with that dilemma? You probably can’t afford to pay for two homes and probably wouldn’t want to even if you could.

• Sell on contingency. Make an agreement with the seller of your new home that you will buy their house once yours sells. This hasn’t worked too well in the hot real estate market of recent years; most sellers want to take the cash from the first person who can put it in their hands. With the market cooling off a bit, it may be easier to negotiate a contingency sale.  In years past, this was generally the way it has been done; it will probably be that way again soon as the market continues to slow down.

• Rent your own home! One possibility is to sell your existing home before you are ready to buy a new one but to arrange with the buyer to rent the house to you for several months while you shop for a new one. This makes it easier to buy the new house as you are not encumbered by the old one. On the other hand, you’ll have to find someone who is willing to buy yours who isn’t necessarily in a hurry to move in and that could be a bit of a problem.
• Just rent something else. This may be an even better solution than renting out your existing house. Sell your house, move to a rental and shop for a new one when you’re ready. The major downside here is having to move twice; most people hate moving enough that this could be a major drawback.
• Borrow from your existing house. It’s possible to take out a home equity loan on your existing house and use the money as a down payment on a new one. If you are like many Americans, your equity has increased dramatically and you may have more money available to you than you realize. This makes shopping for a new home easier, as you’ll have the money for a down payment at the ready.

Of course, it’s also possible under these circumstances to simply rent out your existing home and use it as rental property after moving. While this solution isn’t ideal for everyone and won’t work at all for people moving out of state or across the country, it may provide a good solution for others.

No matter which solution you use there is a way to buy a new house while owning another.