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I bought my home (a townhouse) in early 2017. Now, I want to "switch houses" in the same area - buy another home and immediately sell my current one.

I still have a sizable mortgage on my current home. I want to maximize the value of the home I can buy next.

Here's my question.
Scenario 1: I sell my current home (and go live somewhere else temporarily); take out a mortgage loan to buy my new home.
Scenario 2: I tell the bank I'm going to sell my home for sure (is this a thing?), buy my new home first, move, and then immediately sell my current home.

Is there a difference in the value of the home I can buy between these two scenarios? Does it depend on how much I've paid in my current mortgage?

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    location tag please – Nathan Cooper Jan 2 at 2:26
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    Generally (at least in my experience) what's done is a third scenario: the purchase of the new home is made contingent on the sale of the current one (perhaps with a cutoff date). – jamesqf Jan 2 at 4:07
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There is a scenario 3.

What people normally do is that they start their search for a new house and put their old house on the market at about the same time.

If you find a house you like, then you make an offer conditional on selling your old house. This is normal, and while some sellers will not want to do that, many will, especially if you are offering good money. You arrange for the sale to close a good way in the future to allow time to sell your own house.

If your house sells first you set a closing date also well in the future, to allow time for you to find and buy a new house.

With careful timing you can arrange for both deals to close on the same day, or within a few days of each other. If you buy the new house a few days before you sell the old one, then finding 'bridge loans' for the case where both deals are already agreed is relatively easy and cheap. If you sell a few days before you buy, then staying in a hotel (and getting a moving company to look after your stuff) is also pretty cheap for a few days.

  • Yeah, when we sold our last house, the buyer had a contingency on selling his old house. – Xingang Huang Jan 2 at 19:56
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Scenario 2: I tell the bank I'm going to sell my home for sure (is this a thing?), buy my new home first, move, and then immediately sell my current home.

This is tricky and not a common "thing". You may have every intention of selling the first house, but Stuff Happens, and the bank really doesn't want to be left holding mortgages on two homes for a customer who can realistically only afford one. Of course, if the bank thinks you're capable of meeting the terms of both mortgages, they will happily loan you the money for the 2nd house under another mortgage. However, they won't just shuffle the mortgage from one house to another as part of the sale process.

You may be able to qualify for a bridge loan to pay off the mortgage on your existing house but you typically need substantial equity in your current home for those. Unless you have substantial assets aside from your house, you probably aren't going to be able to make scenario 2 work.

You are probably stuck with scenario #1.

You didn't ask, but unless you live in a region that's in the middle of a real estate bubble, selling a home you've had for only two years to buy another home is going to cost you a bundle. As the seller you are probably going to be on the hook for commissions, sales tax, other transaction costs. Depending on your mortgage you may even owe mortgage prepayment fees. Unless you have money to burn, you should try to avoid quick moves like this unless something like a new job or a family crisis requires it. Most folks try to stick around long enough for the (hoped for) appreciation in the value of the house to cover these costs.

  • If I remember correctly, proceeds (if any) from the sale of your principal residence is not taxable after 2 years of living there (in the US) - maybe someone can confirm. – flow2k Jan 2 at 10:05
  • @flow2k that's roughly correct but that's only US Federal Income tax. I was referring to state and local sales tax which many locales apply to real estate sales. Where I live (Washington state) it's roughly 1.28%. – Charles E. Grant Jan 2 at 17:34

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