Here are some additional thoughts on a topic addressed by an article that recently appeared in US News.
What are the specific steps you can take to make sure you do not get stuck owning 2 homes?
To eliminate confusion, let’s first define a couple of terms. Buyers are the people who are buying your existing house and sellers are people from whom you are buying your new home.
Option one: You can put a contingency in your purchase contract stating that you will close on your new house only if and when your buyers are ready to close. It gives you an increased degree of protection but, unfortunately, a high percentage of sellers will not agree to such a clause as it puts them at a very high risk. Their sale now depends on a factor that they have no control over and really no information on.
Option two: You can ask your buyers to allow you to stay in the house as a tenant after you close on your sale. The downside of this is that it is a serious inconvenience for the buyers, especially since they will not get the most favorable terms on their mortgage when their lender sees they are buying a house occupied by tenants.
Option three: You may also consider renting out your existing house. This scenario is described in detail in the referenced article. It’s important to keep in mind that, if you apply for a mortgage to buy the new house, your lender may consider the rental income from your existing property – which may hinder your ability to qualify for a mortgage.
The option with the lowest risk is to sell your house first and then purchase a new one; however, this is the most inconvenient for you, since you have to move twice.