Navigating the Process of Buying and Selling a Home Simultaneously: Three Major Milestones and Contracts in Northern Nevada Explained
Navigating the Process of Buying and Selling a Home Simultaneously
Buying and selling a home at the same time. Two separate deals with one goal – to have the sales align in order to seamlessly move from an old home directly into a new home. It sounds complicated – and it is. But it’s not uncommon. Across the country, on any given day, there are thousands of people doing exactly that. Those who’ve experienced concurrent buying and selling know it takes a special understanding, and there are different ways to approach it, depending on want or need. But what can newcomers expect as they begin the process of buying and selling at the same time?
Let’s get started.
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Three Major Milestones
There are three major milestones to be expected when either buying or selling. Since the whole point of this is to get into a new home, let’s begin with buying.
The first step for buyers is simple – go out and start looking for homes (milestone #1). Sometimes a deadline for purchase is indefinite, other times it’s time sensitive (i.e., a new job with an upcoming start date creates a definite deadline for viewing homes). And once the buyer has found the one, they make an offer to the seller (milestone #2). Depending on negotiation with the seller, an offer could be accepted the same day, or in the following two or three days. Customarily, once an agreement is reached (milestone #3), the purchasing process takes roughly 30 days to finalize.
For sellers (both seasoned and first time), there are some possible complexities with listing their home, but the most common place to start is getting the home in shape for sale (milestone #1). If necessary, that could mean removing items, staging, and/or making some repairs in order to get top dollar for the home. Once the prep work is complete, the home is set to go on the market and ready for subsequent showings, open houses, etc. (milestone #2). All the important pieces coming together to find the right buyer for the home – making way for potential negotiation and finally the acceptance of an offer (milestone #3). As you can see, there are obvious similarities with the offer process regardless of what side of the sale one is on.
What is a “normal” timeline in the selling process? Experience teaches that on average, a committed seller takes about a week to get their home ready for sale. That may involve touching up some paint, cleaning up the yard, staging furniture for photos, etc. Then comes the marketing process, and it varies depending on how the market is performing. In a really hot market, it can sometimes take only days to go under contract, whereas in a more balanced market it could take upwards of a month. A good rule of thumb is to expect roughly 20 days or less to receive an acceptable offer. As mentioned before, the time for negotiating can run anywhere between one to three days, give or take – it all depends on the buyer and seller. Last but not least, the purchasing process. It is uncommon in our marketplace for a sale to complete in less than 30 days. There are mitigating factors (like the occasional vacant, move-in ready property), but if there is a loan involved it will likely take the lender at least 30 days to finalize all the necessary paperwork.
Buying AND Selling
Now, let's talk about combining the two – buying and selling two separate homes at the same time. This can be done a couple of different ways: buying first or selling first. How do we overlap that? Particularly if the goal is to have the ending point of each transaction occur on the same day (the seamless move from one house into another)?
We’ve talked about the traditional buying process as well as the traditional selling process. We now need to maneuver things around so that the move aligns on basically the same day. The biggest way is through the purchasing process. If you're a buyer, you can sometimes be flexible about the purchasing process – extending out that timeline, stretching it so that you are able to perform all the steps necessary to sell your home. Conversely, you can do the opposite. You can sell your home and then be a little more flexible in the purchasing process of selling your home – so that you can overlap finding a home, writing an offer on a home, and buying a home.
Writing an Offer
When folks are writing an offer on a home while also selling their current home it’s a little different. That’s called a contingent offer, and it’s a widely used term in real estate, not only in this market, but nationwide. And what it says to the seller is this: “I want to make you an offer on your home that’s contingent on my home being sold.” In plain terms, that means the buyer is not committed to buying that new home unless they are successful in selling their current home. All contracts have the same general guidelines, but because this is not market-specific, different areas have their own principles on doing this, along with their own forms. So, how do the forms work here locally?
Contracts in Northern Nevada
All contracts have within them the milestones mentioned above (each of the traditional processes that will complete the sale). Here in the Northern Nevada marketplace, contracts include language that pertains to different scenarios, depending on where folks are in the process. One of those scenarios is having to sell a house to purchase another. As a matter of fact, it’s as simple as marking (or not marking) the checkbox on line 4. Perhaps the current home is not ready and has not yet been listed. Maybe it is listed and an offer has already been accepted. Or maybe the purchase process has already been initiated. Locally based contracts allow for all of those details.
If a property is in escrow, that means the offer has been scheduled and a certain closing date has been scheduled – that’s a great scenario. However, if you are selling your home and you’ve accepted an offer, and the buyer of your home does not have a home to sell – that is the best-case scenario. It is the most attractive option for other sellers in the marketplace. It’s good to keep in mind that if a buyer is out negotiating on homes in a hotter market, and there is a struggle to get a contingent offer accepted, one of the best ways to get an accepted offer is to have your marketing process far enough along that you’ve already committed to a buyer. That starts lowering the risk to the seller on the other side of the transaction.
Scenario #1: There are occasions when sellers, while in escrow on their potential new home, choose to accept an offer from a buyer who also has a contingent sale. Full disclosure, that can get a little complicated. As realtors in the community, we do our best to avoid this scenario because it can lead to a domino effect – two houses having to sell for a buyer to successfully get that one home. It carries with it a lot of risk, and sometimes sellers will reject an offer based on that alone. At times it’s unavoidable, especially in a balanced marketplace. But based on typical behavior, a seller is more likely to consider an offer from a buyer who is not in the middle of another contingent sale.
Scenario #2: Your home is already listed. Meaning you've already prepared your home for sale. And it's actively being marketed, but you have yet to accept an offer.
Scenario #3: Lastly, you haven't yet listed your property for sale. You still need to prep your home for sale. You have to market your home for sale, and accept an offer and begin the purchasing process.
The third scenario may sound like a seller won't work with you on these types of situations, likely because there are still so many steps to complete. But rest assured, it's actually the opposite. In a balanced marketplace, we often see buyers who wish to find a home first and then get their home ready for sale. It doesn't work quite as well in a hotter marketplace where there's more competition. But in a balanced marketplace where homes aren't selling as quickly, sellers will take it into consideration – especially if they haven't received an offer for weeks on end. This is a box that gets commonly checked, especially when the market has cooled down and homes are sitting on the market for longer periods of time. Why? Because buyers are often hesitant to list their current home until they find another home they love.
Which Comes First?
So, although homes must be sold at the same time, one usually starts before the other. It’s up to the individual which process they’d like to begin with – the buying or the selling. What is the general preference of buyers? Buying the new home first and selling the current home second. The reason buyers prefer this over selling first is the lack of pressure to find that “right” home. They are free to begin the viewing process and the negotiating process without worrying about their current home being for sale.
The reason buyers love this over selling your home first is basically there's no pressure to find that right home. They can start the viewing process and the negotiating process without ever having the added stress of their home being for sale. Again, this is most common amongst folks in a balanced marketplace. The balanced marketplace leads more sellers to be flexible and give buyers extra time to complete the purchasing process – which includes time to prepare, list, and market their current homes.
Now, as mentioned before with the contracts, you're going to have a timeline. What is the general expectation with this type of offer? Traditionally the buyer has about seven days to get their home ready for sale. Then, once it’s officially on the market, they have about 30 days to accept an offer, and a further 30 days to complete the purchasing process on the home they are selling. In sum, that’s 67 days from the time the buyer’s offer is accepted on the home they intend to purchase. 67 days is far longer than the average 30-day period, so it’s important to keep in mind that not all sellers are amenable to this strategy. For this scenario to be successful, a buyer with a contingent sale must not only find a property they desire, but also a seller who is flexible enough to allow for the extra time that is needed.
Selling first is not really an ideal situation, especially in hotter marketplaces. If a person is considering a local move, perhaps because they simply want a nicer home, they tend not to do it in a hot marketplace. Because this can be stressful on a buyer. If they sell their home first, and things don’t go according to plan, they may find themselves in a temporary period where they’re unable to move into their new home. It’s just not as easy to accurately time concurrent closing dates as it is if buying first. So, when does selling first happen most frequently? We see it most often when buyers are relocating to the area and the home they are selling is out of state. These are the folks that are selling either way. If a market is hotter than they would like it to be, they start that selling process first. But then they will focus only on buyers who are willing to be flexible in their house hunting process – that’s the situation in which this strategy is used.
When selling first, the purchasing process can become really spread out. That’s because the viewing, offer, and purchasing process of the home being bought happens after an offer has been accepted on the home being sold. Why? Because it makes the offer stronger. As mentioned before in the contract, that is the least amount of red tape for a homeowner considering a contingent offer.
One secret to this strategy being successful is finding a buyer who's willing to be flexible with sellers who are working to find their next home. Another is understanding there can be speed bumps along the way. What can go wrong? Simply put, there are two purchases happening at the exact same time and milestones can complicate or even cancel a deal. What kind of complications? Inspections are one of the biggest milestones that can cause cancellation of a contract – buyers not approving the condition of the home. Another milestone is the appraisal – the bank’s opinion of the value of the home. If the bank feels the home being purchased is worth less than what is being offered, it can create a huge complication. And last but not least, the loan. It is more rare nowadays as lenders do a great job vetting buyers, but even then a lot can happen with a loan.
The Secret to Success
Here is the one piece of advice we have for individuals looking to buy and sell at the same time: Be Flexible. Be flexible on timelines, negotiations, appraisals, and the proceeds you receive. Understand that starting the process in one way and ending it in another is common when both buying and selling. Be fluid and keep the mindset that you may have to renegotiate to find solutions and keep the deal together. Speed bumps happen and selling can be complex, but with flexibility and a willingness to negotiate, you are more likely to find success – just ask the millions of homeowners who do it year over year.
For the latest insight and tips on the Northern Nevada real estate market, be sure to follow our blog where we do weekly Market Updates to keep you informed. Also be sure to explore our Northern Nevada House Search.
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