Selling and Buying a House at the Same Time

Selling and buying a house at the same time is no easy feat, especially if you need the proceeds from the sale of your existing home in order to afford your new place. Make your life easier by working with the same real estate agent and attorney on both transactions, and try to line up contract signings and closing dates concurrently.

Selling and buying a house at the same time is a complex maneuver that requires plenty of communication and cooperation between the agents representing your home sale and the agents representing your home purchase.

To reduce complexity, we recommend working with the same agent or team on both transactions.

This way, you won’t ever miss a critical deadline because one agent forgot to tell another agent something.

If your buyer’s agent is also your listing agent, he or she will be fully aware of how your sale process is going, and whether you are truly close to a deal on your current home before going too far on a new potential purchase.

In fact, because your listing agent is showing your existing home for sale on a regular basis, he or she may know even more than you do about the prospects of you securing an acceptable deal on your home sale.

In a similar vein to working with the same real estate agent, you should work with the same real estate attorney on both your sale and your purchase.

Doing so has many advantages, such as the ability for your lawyer to drag out or speed up the contract review and due diligence process on either side in order to get you signed contracts concurrently.

Furthermore, it’ll be critical to have the same attorney on both transactions if you’re lucky enough to negotiate a sale or Hubbard contingency on your purchase.

In a transaction as complex as selling and buying a house at the same time, the last thing you’ll want is too many cooks in the kitchen.

You should speak with a mortgage banker as early as possible in the process, ideally before you even list your current property for sale.

A mortgage banker will be able to tell you how much mortgage can I qualify for in NYC, and give you different answers based on whether you should sell your existing home first or not.

You never know, you may make enough income and have so little debt that your mortgage banker will qualify you to get a mortgage on a new place,

without having to de-lever and sell your old home first, and as a result pay off your old mortgage.

Not only will getting mortgage pre-approval in NYC give you confidence in what you can and cannot borrow, you’ll also appear more serious to any agents you speak with if they know that you’ve already been pre-approved for a mortgage by a credible third party financial institution.

You need to put your home up for sale first before you start seriously engaging on properties because it generally takes longer to find a buyer than for a buyer to find a listing.

In fact, the average time on market from listing to a signed contract in NYC as of this writing is just over 100 days. This means it’ll take you on average a little over 3 months to get in contract with a buyer on your current property, which means you should list your property first and as soon as possible.

Of course, you can always keep an eye on the market, and even casually look well before you decide to proceed with listing your property. However, while it never hurts to be aware of what’s out there, we don’t recommend making offers until you’re much further along with your own sale process.

After your home is listed on your local MLS (or REBNY RLS if you’re selling in NYC) and all relevant websites, it’s time to start exploring what’s out there in earnest. You should attend as many open houses as possible, and have your buyer’s agent schedule private showings for anything that doesn’t have an open house listed.

Now is the time to start narrowing down the neighborhoods and streets that you wish to move to, and even narrowing down a list of potential properties that you may wish to buy. Work with your buyer’s agent to keep tabs on a list of potential candidates for your new home, and make sure your buyer’s agent is in touch with the listing agents so you know the latest status on everything on your list.

It’s okay at this stage to start asking sellers and listing agents whether they’d be open to a Hubbard contingency, otherwise known as a sale contingency.

Remember that an offer with a sale contingency is much less attractive to a seller because of the uncertainty involved and the lack of control the seller has over the buyer’s own sale process.

As a result, only a desperate seller with a stale listing that’s been on the market for 100 days or more might consider an offer with a sale contingency.

Don’t expect find too many sellers who’d be willing to agree to an offer with a Hubbard contingency, even in a slow real estate market. And if you do manage to find that rare seller who’s not in a rush and open to such an arrangement, then you’ve hit the proverbial gold mine.

You can submit an offer with a sale contingency, and even go into contract without first having found a buyer yet for your own home. This will give you a lot of flexibility and breathing room when selling and buying a house at the same time.

Once you’ve started receiving offers on your own home, and your listing agent and attorney become confident that you’ll be able to get a signed contract on terms acceptable to you, it’s time to start placing offers on potential new homes.

Remember that real estate offers are not binding in NYC until contracts have been signed, and there’s no rule for how long you can take to get back to someone with a counter offer. In fact, there aren’t many rules around offer negotiation period, and nothing really matters until a purchase contract is fully executed.

This means you use this greyness to your advantage to try to line up both deals concurrently. For example, if you have an accepted offer on one deal that’s ready for contract signing, but are still waiting for the other deal to finish contract diligence, you can always drag out the process for the first deal and delay signing until the other deal is about to also cross the finish line.

Remember that the contract review and due diligence period after an offer has been accepted is typically one to two weeks, which means there’s a lot of variability for you to drag out the process if you need more time on one deal or the other.

You should minimize the buyer’s contingencies on your own home sale, to maximize the chances that your own sale will go through. The last thing you’ll want is for your own sale to fall through after both transactions are in contract already.

If this happens and you don’t have a Hubbard contingency on your buy side deal, then you may be in a real tough situation and be forced to fund your purchase without the proceeds from your sale. In this situation, you may be forced to deal with a hard money lender, which is essentially a loan shark in real estate, for a short term bridge loan.

Just remember that the most common contingency you’ll see in NYC real estate is the financing contingency, otherwise often known as the mortgage contingency, if you’re selling a condo or a co-op. If you’re selling a townhouse or a standalone property, then the buyer will typically want a home inspection as well, though they often won’t ask for a contingency.

As a result, we don’t recommend accepting any other non-standard contingencies other than the mortgage contingency. And if you can get the buyer to waive the mortgage contingency, perhaps so they can be more competitive over other competing buyers, then even better.

You should try to maximize your protections and contract contingencies on any purchase, whether you’re buying for the first time or if you’re selling and buying a house at the same time.

You should definitely ask for the standard mortgage contingency when you submit an offer, and during the contract review period you can ask your lawyer to make sure that an appraisal contingency and minimum loan amount language is included in the financing contingency.

You could try to ask for an inspection contingency, though most sellers won’t agree to it as properties are sold as is. You can of course ask to do a home inspection, but you’ll need to get it done before signing a contract in most cases.

Lastly, you can try to ask for a Hubbard or sale contingency, though as we’ve previously discussed most sellers will not be amenable to this idea. If you happen to get lucky with a desperate seller who does agree to this, then you’ve really hit the jackpot as your time pressure will have disappeared almost completely.

If you’ve followed our previous advice, you’ll have hired the same real estate attorney to work on both transactions. This way, your attorney will be able to take advantage of the “on or about” clause in re-sale contracts which gives a 30 day window around the stated contract closing date to actually close.

This 30 day window is quite standard, and basically means no one will get mad if you miss the contract closing date by 30 days on either side. However, once you miss the 30 day window, the other side may get angry and could send a time is of the essence letter to you demanding that you close.

If everything works out, you could conceivably have the same closing date for both your sale and your purchase on their respective contracts. Even better, have your attorney set the closing date for your purchase to be a few days ahead of the closing date for your sale so you can have a few days to move into your new home.

If you’re lucky enough to be able to afford to buy a new property without having to sell your old home first, then the process of selling and buying a house at the same time becomes dramatically easier.

You won’t be under the same time pressure to time your transactions just right, though of course you may still wish to sell your old home sooner rather than later due to carrying costs. After all, no matter how much money you have, no one likes to pay real estate taxes, HoA dues, common charges or maintenance fees on an empty property.

With that said, selling and buying a house at the same time in this manner is a true luxury. You won’t have to worry about moving out of your old home and moving into your new home on the same day. You won’t have to fret about getting into contract on a new property just as you’ve gotten a signed contract on your old home. If you’re planning to renovate your new home before you move in, you won’t have to worry about being homeless for a few months because your old home is already sold.

Alternatively, you can always rent out your old house instead of selling it, if you can afford to buy a new home without having to sell your old home first. Doing so means your old property will be classified as an investment property, which means a whole slew of tax benefits in addition to the rental income you’d receive.

For example, you’ll be able to take a paper loss of approximately 3.6% of your cost basis per year, until a residential rental property is fully depreciated to zero after 27.5 years. Furthermore, you’ll be able to write off all of your expenses associated with the property, such as your common charges, maintenance fees, HoA dues, real estate taxes, accounting fees, handymen fees, repair and maintenance costs, etc.