🔑 Key takeaways:
With most home trade-in services, you can actually purchase and move into your new home before you sell your old one. This helps you to avoid paying two mortgages at once and removes any financing contingencies from your offer on a new house.
Home trade-in programs allow buyers to leverage the equity that they have in their current home to buy a new home. Typically, trade-in services use their cash to purchase your new home, and then you pay them back once your old home sells.
This effectively turns any offer that you make into a cash offer, which can be very appealing to sellers.
💵 How much does it cost to use a trade-in service?
Trade-in providers charge a fee, which they often call a service fee or convenience fee. The fee is usually a percentage of the old home's sale price. However, buyers and sellers usually still need to contribute to the closing costs that would be associated with a normal transaction.
Alternatively, you could work with a top-agent for a flat fee and save money when you sell your home.
How do home trade-in programs work?
The specifics of how each company organizes their trade-in service may differ, but generally speaking, most companies make a cash offer on a new home on your behalf.
- To qualify for this service, you'll need to request an assessment. The cash amount that you qualify for typically depends on how much equity you have in your current home, so a trade-in might not be an option if you've only owned your current home for a short period of time.
- Once the cash offer is accepted, the trade-in provider purchases the new home on your behalf, and you can move in.
- Next, the trade-in service lists your old home for sale. If the company sells that house, they'll pass the profits along to you, minus whatever cash they fronted for your new home and any applicable fees.
Some trade-in services have their own in-house mortgage options that you're required to use in order to qualify while others let you shop around to find the best possible rate.
What if my house doesn't sell?
If the trade-in company doesn't sell your house, they will usually buy it from you for an amount that you agreed to at the start of your transaction.
This backup offer is generally less than what you'd get on the open market, but it does give you the assurance that you'll be able to sell that house even if the right private buyer doesn't come along.
Is a home trade-in the same as an instant cash offer?
No — companies that make instant cash offers are called iBuyers, and they generally make offers that are at or below fair market value so that they can resell your house on the open market.
A trade-in service, on the other hand, still gives homeowners the opportunity to list their home on the open market and get the best possible price.
Some iBuyers, like Opendoor, have a trade-in program, and most trade-in services will still buy your old home from you if they aren't able to sell it after a certain period of time.
The main difference between trade-in services and iBuyers is that iBuyers are focused on purchasing homes and reselling them quickly, while trade-in services are focused on helping you finance the purchase of your new home and then listing your old one.
Home trade-in pros and cons
Home trade-in costs
Every home trade-in service structures its costs a little bit differently, but the cost to trade-in a home generally includes:
- A service fee. A percentage of the purchase price that the company charges for conducting the trade for you. Sometimes this includes the agent's commission, and sometimes it doesn't.
- Closing costs (buyer and/or seller). You'd be responsible for these in a typical real estate transaction too. With a trade-in service you sometimes have to pay your closing costs as a buyer, as a seller, or both. Buyers usually pay 3-5% in closing costs while sellers pay 1-3%.
- Loan origination fees. Fees that you need to pay your mortgage lender. Keep in mind that if your lender is the trade-in company, you'll have to pay this fee directly to them. The average loan origination fee is 0.5-1%.
- Rent. Some trade-in services charge rent on a daily or prorated monthly basis until you buy the new home back from the company.
- Cash repayment. Since the trade-in company fronts the cash to buy your new house, you have to buy it back from them once your old home sells.
The fees and expenses that are passed onto you when you trade-in your home aren't charged until your old home sells. This means that they're deducted from your profits, so you'll only have to pay cash out-of-pocket if the costs exceed the profit.
🏠 Rent charges can add up!
In most cases, you'll need to continue paying the mortgage on your old home before it sells, plus utilities and taxes.
If the trade-in service charges rent on your new home until you buy it back, your final costs might be higher than you anticipated, depending on how long it takes to sell your old house.
What to watch out for when you use a home trade-in program🏦 Lender restrictions. Some home trade-in programs require you to use their mortgage lender in order to qualify. In this case, the mortgage interest and fees that you pay might not be the best available rate.
👨💼 Agent restrictions. If the trade-in program requires you to work with the company's in-house agents or partner agents, you might not be able to negotiate a better commission.
⏲️ Time limits. While backup cash offers are reassuring, you typically can't access them until your home has been on the market for a certain period of time. Flyhomes, for example, requires you to list your house for 90 days before you can accept their cash offer. That means you have to pay the mortgage and utilities for at least three months before you can sell directly to the company.
Popular home trade-in programs
The largest home trade-in programs are offered by companies like:
Here's a quick breakdown of how some of the largest trade-in porgams compare to each other:
❌ (part of bridge loan)
$30-50 /day (with "Offer Boost")
Only after 120 days — 0.02% per day
Mortgage payment until old home sells
0.5-1% (after the first 30-days)
Mortgage (in-house or other)
Up to $25k
Partner agents, (or bring your own)
Must work with an in-house agent
Must work with an in-house agent
Must work with an in-house agent
Must work with a partner agent
Knock was one of the first home trade-in services to offer customers an easier way to buy a new home before they sell their old one. With Knock, you get a bridge loan that helps you cover your new home purchase and repairs to your old home before it sells. Knock charges a 1.25% service fee.
Orchard helps buyers and sellers in Georgia, Texas, Colorado, and North Carolina. Besides financing the purchase of your new home, they'll prep and list your old home after you move out. You'll pay a 6% service fee when your old home is sold.
Opendoor is the largest iBuyer on the market, but they've recently added a home trade-in program. Opendoor charges 5% and gives you the option to list your old house or sell it directly to them. Unlike some trade-in programs, Opendoor doesn't require you to list the property before accepting their cash offer.
Reali's trade-in service includes unique perks like home staging and cleaning before your old house is listed. Reali charges a 5% service fee and closes on new homes in just five days, on average.
Flyhomes is a west coast home trade-in service that works with customers in Seattle, Portland, the Bay Area, and Boston. Flyhomes charges a service fee that ranges from 2.5-3% but offers up to 0.75% cash back after closing.
HomeLight allows people to move into a new home by purchasing their old one and then passing along any additional proceeds (minus fees and expenses) once the old home sells. However, customers who don't use HomeLight home loans are charged a 3% fee, rather than a 1% fee.
Homeward makes it possible to buy your new home with a cash offer before your old home sells. There's no set service fee because Homeward determines the fee based on market conditions and the value/location of your home. Homeward charges a rental fee for you to live in your new home before your old one sells.