Plenty of people find themselves buying and selling a home simultaneously, but knowing that others have gone through the same stress does not make it one bit easier. After all, the stakes are so high: If your buyer backs out, you don’t have any cash to land your next home! Or if your own purchase falls through but your current home sells, you’re homeless!
It’s all like walking across the Grand Canyon on a tightrope: The tiniest thing goes wrong, and you fall.
Breathe in. Don’t panic.
It turns out that most buying-and-selling mistakes are easily avoidable — or at least predictable. Follow these eight tips to enter escrow with eyes wide open.
1. Waiting too long to prep your home for selling
Every home needs a little work before selling. You might need to repaint some scratched walls, fix broken decking, or add grout in a rarely used bathroom. Don’t wait until the last minute to kick-start this process, otherwise you could wind up in a bind.
Take, for example, a client who was trying to buy and sell simultaneously. They were advised repeatedly to start prepping the home, but he kept pushing it off and pushing it off, despite actively looking for a new home and submitting offers.
Once the client went under contract to buy a home, suddenly they found themselves rushing to list their existing home. When they finally finished prepping, it was already October — precisely when the market was slowing down and it became tougher to find a buyer.
That’s why it’s advisable to get the little projects out of the way.
2. Skipping the backup plan
When you’re buying and selling simultaneously, the number of moving parts doubles. And if any of those parts gets jammed, it can throw off both transactions.
There’s the example of a three-way transaction where the sellers of property A wanted to buy property B — and the sellers of property B wanted to buy property C.
They had to coordinate two closes and three different families moving in and out of properties.
It worked out, but there’s a caution to assume that you won’t be able to buy and sell at exactly the same time.
And with that assumption, you better have a plan in place in case everything goes wrong. Keep your emergency fund well-stocked. In a best-case scenario, you may simply need a hotel for a week, but you may also find yourself looking into short-term rentals. Have cash on hand — in addition to your down payment funds — to survive the setback.
3. Buying too big
One of the biggest mistakes that simultaneous buyers and sellers make is the same one that many first-time buyers make: They fail to get pre-approved on their new loan.
Pre-approval is essential, because it puts a stop to unrealistic dreaming by telling you exactly what size of house you can afford.
Buyers assume that with a large down payment and increased income, they will automatically qualify for a larger home loans. Many do, but not as large as they think or wish. They begin the search and are disappointed when they can’t upgrade as much as they thought they would be able to.
4. Working with too little cushion
You know what price your house should sell for. But what if the market softens? If you’re forced to take an offer that’s $20,000 less than expected, there goes the down payment on your new home.
Give yourself a cushion on what you need to sell your existing home for.
If you’re hoping to use the entire sale price as a down payment on another home, move forward with the assumption your home will sell for less than expected.
5. Failing to compromise
Don’t forget you’re not the only human in a stressful situation. That person selling your dream home? And the buyers under contract for your current place? They’re all probably stressed, too.
So keep that in mind when issues come up — for example, if the buyers need an extra week of escrow because there was an issue selling their home, or the sellers don’t think they need to fix a leaky pipe for you.
One mistake is expecting so much from the people selling the home, but not being willing to give anything to the buyers of their own home. A little compromise goes a long way, especially when there are two escrows (or more) on the line.
6. Using two different REALTORS®
Expect this already messy process to get even messier if you’re juggling agents for your listing and for buying a new home. Simplify things by using the same agent for both transactions.
Having control and insight over both transactions allows them to make sure that they close both homes simultaneously.
There are two instances when you should not use the same real estate agent. If you’re moving out of province, look for a reputable buyer’s agent in your new location. If you’re remaining in the same area, you may also meet and like an agent who works exclusively with buyers or sellers — not both. In that case, ask for a recommendation within your agent’s brokerage so you can, at a minimum, keep both transactions under the same roof.
7. Closing on a Friday...
While you should work with your agent to determine the best timing, you’d ideally want to finalize the sale of your current home first, and then close on your new one. Try to aim for closings within two or three days of the other — and never on a Friday.
That’s because bank transfers can take a few days to go through. In order to ensure there’s money in your account when the time comes, buffer a few days to transfer funds.
8. ...or late in the afternoon
When you’re scheduling those closings, aim for the morning — especially on the sale of your current home.
Closing in the morning allows extra time for the money to hit your account.