buying a house before selling your current one?

[megan1104]

Does anyone advice for buying a house *before* selling your current one? As background, we've been in our current house in Seattle for about 10 years. We owe just about $230k on our mortgage and the house would probably sell for $1.1-1.3 million. While we'd like to be mortgage free, we likely are not going to move to a cheaper cost of living area due to schools. Therefore, a new house would likely cost about the same as what we could sell for.

My questions are: what are the best financial products to do this? For example, has anyone had any experience with of the methods outlined in this article? Are there are other paths?
https://www.nerdwallet.com/article/mortgages/how-to-buy-and-sell-a-house-at-the-same-time

[iluvzbeach]

We recently assisted my MIL in the sale of her home.  The buyer used a bridge loan to buy her house, without contingency, while they awaited sale of their existing home elsewhere.  The buyer had enough equity in their former home to do the bridge loan at 100% and the lender knew that once the old place sold the buyer would end up with a mortgage since the new place (my MIL's place) was more costly than the buyer's former place.  I guess the bridge loan more than covered the down payment for the place the buyer was getting from my MIL. 

[lhamo]

I recently tried to do this to buy an extreme fixer-upper.  Being FIREd with no active income streams (we are still living off savings to keep on-paper income low) made it challenging.  The one option that seemed viable was a cash-out refi on current property.  But to extract what I needed to buy the fixer + fund the repairs needed to make the house weather tight (it had a roof that should have been replaced a decade ago and a brick facade that was falling off), it would have cost me over 20k in closing costs and nearly 30k in carrying costs on the loan (did you know you have to hold a re-fi loan for 180 days after it transfers to the final holder of the loan?  yeah, me neither until I tried it).  Decided the house was too much of a money pit to lose 50k off the bat on, and did not place an offer.

Instead we found a nearby rental and have spent the last two weeks moving/getting our house ready to list.  It hits the market this afternoon.  Let me know if you'd like a nice lake-view house in NE Seattle near the BG trail!  I'll PM you the listing...

[ChickenStash]

A friend recently went from a paid-for small house to a larger one with a mortgage and he more/less went the route described in the article doing a downpayment with mortgage on the new joint and recasting after the sale of the old house. He didn't want to hassle with contingencies and carrying a larger mortgage for a while wasn't a burden. This was during the peak craziness in the local RE market and his old house sold the first weekend it was listed so there wasn't much carrying time.

[Askel]

I've done it, and continued to live in the old (paid for) house for about a year until we got the new one livable.  Even took out a home equity line of credit on the old house to pay for some work on the new house.   

But both houses cost less than we make in a year so the financing wasn't hard to pull off at all.   

My one piece of advice though would be to pay attention to taxes- in MI, your primary residence is taxed at a lower rate than any other residences you own.  I should have made the more expensive house our primary residence.  Overall, it probably didn't cost me more than a $1k, but that did really screw up our escrow numbers for a couple years.   Some localities allow you to have two primary residences if one is on the market- all worth investigating.   

[RWD]

We bought a house without selling first this year. But we didn't need the equity for a down payment and had enough income to qualify for the new mortgage even while carrying the old one (previous house was much cheaper). The first contract for selling the old house fell through day of closing so it is a good thing we weren't contingent on it selling to buy the new house.