Should I Sell My Home Before Buying Another Home in Northern Virginia?

If you're thinking about buying your next home, you may assume you have to sell your current home first. That isn't always the case.

There is no one-size-fits-all answer to whether you should buy or sell first. Before I recommend a strategy, I want to understand your financial situation, what's most important to you, and how much risk and inconvenience you're comfortable taking on.

Start With This Question: Can You Buy Before You Sell?

One of the first conversations I recommend having is with a lender.

Can you qualify for your next home while still carrying the mortgage on your current home?

If the answer is yes, you may have significantly more flexibility than you realize. If the answer is no and you need the equity from your current home to purchase the next one, then we need to build a different strategy.

The important thing is not to assume you know the answer before exploring your options.

The 6 Options I Walk Through With My Clients

When someone needs to buy and sell at roughly the same time, I walk them through six potential strategies. Each has advantages and tradeoffs, and not every option will make sense for every client.

1. Purchase and Then Sell

Buy your next home first, move into it, and then put your current home on the market. This can give you strong terms on both the purchase and the sale and can make the move considerably easier. The tradeoff is that you need to qualify while carrying both homes and be comfortable with the temporary carrying costs.

2. Purchase and Then Rent

Buy your next home and keep your current home as a rental. This can allow you to hold the property and potentially build equity over time. For someone becoming a landlord for the first time, however, there are financing, cash-reserve and property-management considerations that need to be evaluated carefully.

3. Home of Choice Contingency

With a Home of Choice Contingency, you put your current home under contract but make the sale contingent on finding a suitable replacement home. The advantage is that you don't have to complete the sale if you cannot find the right next home. The downside is that buyers of your current home take on uncertainty while they wait for you to secure your replacement property.

4. Sale of Home Contingency

You find your next home and make your purchase contingent upon the sale of your existing home. This can reduce the financial risk of owning two homes at once, but in a seller's market it can significantly weaken your offer. A seller comparing similar offers may prefer the buyer whose purchase isn't dependent on another property selling.

5. Bridge Loan

A bridge loan is short-term financing that may allow you to purchase your next home while waiting for your existing home to sell. It can eliminate the need to move before selling and may help you make a stronger offer on the next home. The tradeoff is additional lending expenses and closing costs, so the numbers need to make sense.

6. Sell With a Rent-Back

You sell your existing home and negotiate the ability to remain there for an agreed period after settlement while you look for or prepare to move into your next home. This can make your next offer more attractive because your current home has already sold. The tradeoff is time: you have a defined window to secure your next home, and if you don't, you may need temporary housing.

A Recent Annandale Buyer Thought They Had to Sell First

I recently worked through this exact situation with clients buying a home in Annandale.

When we first talked, they didn't think buying their next home before selling their current home was possible. Instead of immediately putting their home on the market, we laid out their options and talked through the pros and cons of each.

I connected them with a lender who determined they could qualify for the new home without selling first.

That completely changed our strategy.

They're now scheduled to close on their new Annandale home in early September. They'll be able to move their belongings into the new house and then immediately turn their attention to getting their existing home on the market.

Instead of trying to coordinate a sale, purchase and move simultaneously, we've been able to create a much more manageable transition.

Recasting the New Mortgage Can Be Part of the Strategy

The lender I recommended also offers the ability to recast the mortgage.

After my clients sell their existing home, they can potentially apply a portion of those proceeds toward the principal balance of their new mortgage. The lender can then recalculate the monthly payment based on the lower principal balance without requiring a traditional refinance.

There are lender-specific requirements and not every loan is eligible for recasting, so this needs to be discussed with your lender before making it part of your plan.

For the right buyer, though, it's an option worth exploring.

The Right Strategy Depends on You

When I'm helping someone buy and sell in Northern Virginia, I don't start by telling them they should buy first or sell first.

We start with questions.

Can you qualify while carrying your existing mortgage?

Do you need the equity from your current home for the next purchase?

How important is it to avoid moving twice?

How much financial uncertainty are you comfortable with?

How competitive is the market where you're trying to buy?

Once we understand those answers, we can build the strategy around you.

Sometimes that's selling first. Sometimes it's buying first. Sometimes a rent-back helps bridge the gap. And sometimes a financing option you didn't know was available changes what's possible.

The goal isn't simply to complete two transactions.

It's to determine the best sequence for your particular situation and make the transition from one home to the next as manageable as possible.

About Steve McIlvaine

Steve McIlvaine is a Northern Virginia REALTOR® with the McIlvaine Home Team at Keller Williams United. He helps buyers and sellers throughout Fairfax County and Northern Virginia navigate the financial, logistical and contractual decisions involved in buying and selling a home.