How to buy and sell a home at the same time

Buying and selling a home at the same time can be both exciting and complicated, so knowing what to anticipate before you start can help you approach this significant change with more confidence.

Purchasing a new home while selling your current home requires careful coordination and expert insight to navigate the timing of both transactions and the tax implications they can create.

Before putting your home on the market or looking for a new one, knowing whether you’re in a buyer’s market or a seller’s market may impact the timing of your decision.

• A buyer’s market occurs when there are more homes available than people looking to buy.
• A seller’s market occurs when there are more buyers than homes available.

Therefore, if you’re in a buyer’s market, you may wish to buy your next home first. However, in a seller’s market, you may want to sell your existing home first. Working with a professional real estate agent can help you understand your current housing market and what approach is best for you. You may also choose to work with a single agent so they can coordinate both transactions and ensure communication stays with that single point-of-contact versus multiple agents.

Additionally, it’s crucial to understand how the transaction order will impact your living situation and monthly budget.

• If you buy a new home before selling: When you choose to make an offer on a new home could depend on the timing of the sale of your existing home. If you buy a new home before selling, you’ll likely be able to avoid needing temporary housing. However, some buyers can have difficulty qualifying for a new mortgage if they have an existing mortgage, so verify with your real estate agent and lender what options are best for you.
• If you sell your home before buying a new home: While you’ll avoid multiple mortgages with this option, the tradeoff is you may have to find temporary housing until your new home purchase is complete. In this scenario, this likely means moving twice — once to move your belongings from your home into storage (which costs money), and then again to move your belongings into your new home.

However, you can work with your real estate agent to explore other temporary housing solutions, such as a rent-back agreement. A rent-back agreement is a contract between the home seller and buyer, where the seller becomes the buyer’s temporary tenant and pays rent to continue living in their former home even after the closing date. Normally, these agreements are temporary and simply give the sellers time to close on their new home without a gap in housing.

While coordinating the simultaneous purchase of a new home and the sale of your current home, you can understand the possible tax implications early in the process to help ensure there are no surprises down the line.

• Transfer taxes – A transfer tax may be due upon completion of a home sale transaction. This is a tax on the transfer of the title or legal deed from a seller to a buyer — typically calculated as a percentage of the home’s value. Transfer taxes vary by state and locality. As you coordinate the timing of your home sale and purchase, discuss with your lender whether you or the buyer must pay transfer taxes, and what information each party must know.
• Available deductions – Mortgage interest rate deductions and property tax deductions may be available. Learn more about homeownership taxes and consult with a tax advisor to learn if you meet certain requirements. Visit our tax center for more information.

While you can’t control everything about the housing market or the home purchase process, creating a plan and anticipating relevant tax implications can help make the process smoother for you.

As you begin thinking through the timeline of selling your old home and purchasing a new home, start searching for a real estate agent who can provide additional guidance. And be sure to speak with a home mortgage consultant or tax advisor to understand how these transactions may impact you financially.