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September 2, 2009

Caught in between selling and buying a home? Coldwell Banker® has tips on what to do.

The first question I am frequently asked by clients is: “Should I sell my current home before I look for a new one?”  Trying to sell a home and buy one at the same time can be challenging. Many home buyers find themselves caught in a difficult position.  They often cannot place an offer on a desired home without committing the money they expect to receive from the sale of their current one.

Below are some tips on how to close the gap between buying and selling a home:

Consider bridge loans. A bridge loan means borrowing from the current home’s equity until the proceeds from its sale are obtained. Some bridge loans require that only the interest be repaid; others mandate a single payment of interest and principal when the loan needs to be paid back. If protracted, bridge loans can be expensive, so it is best to use them for overlaps of a short period of time between closings.

Buy on contingency. Have a prior-sale contingency included in the purchase contract of the new home. It provides the opportunity to withdraw from an offer if the current home does not sell by a specific and agreed upon date.

Evaluate whether to buy or sell first. You could still find yourself caught in between, even with a prior-sale contingency clause. Home owners must consider which is better to do first. In a seller’s market, locating the new home and starting the buying process may be the best approach. Most people need to sell their current home to qualify for a loan to purchase the next one, which is often more expensive. In a buyer’s market, you should be aware of the market conditions and the possibility of not being able to sell your current home quickly.

Review home equity options. For those who need to borrow for a longer period than just a few months, it is best to use a home equity loan or a fixed-rate line of credit, particularly if sizable equity has been built up.


With any of these options, I always advise my clients to use their own best judgment about the level of risk with which they are comfortable.  Just because a lender will give you the money, doesn’t mean that you should necessarily take it.  When in doubt, consult your financial advisor.


Patty Cunningham, Realtor®                                                   390 Waterloo Blvd, Suite 101
Coldwell Banker Preferred                                                 Exton, PA 19341
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