Should you buy before you sell?

moving day book 1


There’s the short answer. Now for the longer version.

I have a severely handicapped sister who lives at home with my Mom. There was no way we could show the property until Mindy and my Mom were moved to their new home. The new house was purchased all cash prior to the sale of their former home. If we had to do it all over again, it would be done the same way. Buy first…move in…then sell.

But very few people have the money to purchase their new home before selling their current home. Even fewer people do not need to know for sure how much their current home will sell for, before deciding how much to spend on their new home. Getting an appraisal on your current home is not an assurance that you will actually sell your home for that amount. Still, for some people, buying first if they can well afford it, will help them to get top dollar for their current home, especially if they have children, pets, or as in my Mom’s case, a severely handicapped family member.

The most common way that people move to their new home before selling their current home is via a “bridge” loan. I once bought a home that had tons of wallpaper and I wanted to strip the wallpaper before I moved in. I used a bridge loan to close on the new house before I had the money from my then current home. I did not take out the “bridge” loan until my home was in contract and past the inspection phase and all contingencies. I then used a bridge loan for two weeks so I could strip the wallpaper and move in a bit more leisurely. I had three small children at the time and I was moving to a larger home in the same neighborhood. All went well and the bridge loan was paid off when my home closed after we were all moved in to the new home.

The main purpose of this post is to tell you that “bridge loans” are NOT easy to come by these days.

I hear a lot of talk about how much the mortgage industry is “tightening” and how much it is “changing”. The reality is…it is just going back to the way it always was.

Bridge Loans are for people who are in contract on their current home and who want to avoid the hectic moving after closing and within 24 to 48 hours. They are not to lock in a price that has not been tested on the current home. Very few lenders want to take the risk of not being in first position by extending financing based on what you THINK your home will sell for these days.

If your lender told you you could buy before you sell via a “bridge loan”, CHECK AGAIN! They may have changed their mind.