Buy-before-you-sell services enable you to purchase and move into your new home before you sell your old one. If you’re concerned about lining up the sale of your old house and the purchase of your new one, buy-before-you-sell programs can provide a solution.
Typically, buy-before-you-sell services — also called trade-in services — provide you with a short-term bridge loan based on your current equity, which you then use to make an offer on a new house. This home equity loan is paid back once your old home sells.
This effectively turns any offer you make into a cash offer, which can be very appealing to sellers, and eliminates the need for temporary housing between moves. Most buy-before-you-sell companies will also buy your old house for cash if it fails to sell after a certain period.
The downside is that these companies typically charge hefty fees and interest rates for their services. In some cases, you may be better off using an alternative method for selling before you buy, such as a home sale contingency with a real estate agent.
With Clever, you can easily compare offers from a variety iBuyers and cash buyers to the sale price you'd get with an agent! We'll guide you through each option — for no added fees or commissions.
With Clever Offers, you can sell your house for cash in as little as 1–2 weeks without sacrificing your equity. Get up to 89% of your home value upfront, use the cash to move, and keep the additional upside when you sell on the open market for your asking price.
Get Cash Offers5 top buy-before-you-sell programs
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Knock's Bridge Loan lets you borrow against the equity in your current house to buy a new home before you sell.
The loan covers your down payment, moving expenses, home prep costs (like minor repairs and staging), and ongoing mortgage payments while your house is being listed. You can also borrow up to $35,000 for home improvements before listing.
If your current home doesn’t sell within six months, you have a guaranteed cash offer to fall back on, worth about ~80% of your home's market value. See our full Knock review
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Orchard is a solid option if you want to try selling on the open market, but you like the certainty of having a backup cash offer.
Its trade-in service lets you borrow the equity in your current home to make a non-contigent offer on a new one, meaning you don't have to wait for your house to sell to free up funds for a down payment and closing costs.
The downside? Orchard's fees start at 8% of the sale price. And if your house doesn’t sell on the open market, Orchard’s backup offer will be less than your house is worth. See our full Orchard review
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Flyhomes enables you to make an attractive cash offer on a new home, while their buyer guarantees take some of the stress out of buying before you sell.
Flyhomes offers a bridge loan (a short-term loan) that allows you to make a cash offer on a new house before selling your old one. Fees are lower than those charged by other buy-before-you-sell programs, although interest rates vary and may be high.
Flyhomes has a couple attractive buyer guarantees, including a 120-day backup cash offer on your old home. In some cases, if you change your mind about the new property you want to buy after your offer has already been accepted, Flyhomes can even buy the house instead (subject to conditions).
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Homelight’s Buy Before You Sell program lets you tap into your home’s equity to make an attractive cash offer on a new home before you sell.
Like most buy-before-you-sell programs, Homelight will buy your old property if it doesn’t sell. However, Homelight’s cash backup offer kicks in after just 90 days, significantly less than the competition. That can mean you won’t be stuck paying expenses on two properties for overly long if your house doesn’t sell.
However, Homelight does charge a 2.4% service fee upon closing of your existing home. You’ll also have to pay interest on the money Homelight loans you for your purchase, which could be high.
How do buy-before-you-sell programs work?
Each buy-before-you-sell program operates a little differently. In general, however, most involve making a cash offer on a new home by tapping into your current home’s equity with a short-term bridge loan:
- First, you must determine if you’re eligible for a bridge loan. The cash amount you qualify for typically depends on how much equity you have in your existing home, so if you've only owned your current home for a short period you may not qualify.
- Once your loan is approved, you can use it to make cash offers on new homes. Some companies require you to use their own realtors during this step, while others let you choose your own.
- Next, you list your old home for sale, often with the assistance of the buy-before-you-sell company. Any fees will be deducted at closing and your bridge loan will be refinanced into your mortgage. If your house doesn’t sell within a certain timeframe, the company may buy it from you directly (although for below market value).
Some buy-before-you-sell services have their own in-house mortgage options that you're required to use to qualify or to take advantage of special offers. Others let you shop around to find the best possible rate.
What if my house doesn't sell?
If your existing home doesn’t sell within a certain period, you can sell it directly to the buy-before-you-sell company. The amount offered will have already been agreed upon at the start of your transaction, and it will almost always be below market value.
This backup offer assures you that you can sell that house even if the right buyer doesn't come along. The backup offer's timeframe varies by company but generally ranges from three to six months.
Is a buy-before-you-sell program the same as an iBuyer?
No — iBuyers make fast cash offers on your home, which they relist to sell for a profit or sometimes rent out. They typically don’t help you make an offer on a new house before you sell.
On the other hand, a buy-before-you-sell program allows you to list your home on the open market for the best possible price while also purchasing a new home.
However, iBuyers offer flexible closing dates, so you can use them similarly to a buy-before-you-sell program. For example, you can get an offer from an iBuyer, choose a closing date that gives you plenty of time to find a new home, and then buy and move into your new home.
Pros and cons of buy-before-you-sell programs
Buy-before-you-sell programs can be a good option if you want to move quickly, but want to take your time selling your current place. Using one of these programs, you can avoid many risks of buying first and selling later, such as paying two mortgages.
But the convenience comes with risks. Fees and interest rates may be high, and restrictions often limit who is eligible for the best offers. Here’s a breakdown of some of the most common pros and cons of buy-before-you-sell programs.
Pros
- No double mortgage
- Backup cash offer
- Flexible timeline
- Make your offer stand out
- Use your equity advance on home improvements
- Avoid renovation headaches
Cons
- Service fees
- Limited markets
- Rent/carrying costs
- Lender restrictions
- Agent restrictions
- Time limits
A buy-before-you-sell program offers several benefits, such as avoiding double mortgage payments and providing a backup cash offer. This flexibility allows for a smoother transition, letting you move out at your convenience and avoid renovation disruptions. Making an all-cash offer can increase your bid's attractiveness to sellers, and some programs allow using your equity advance for home improvements, potentially boosting your home's sale price.
However, these programs also have downsides, including service fees up to 6% and limited availability in select markets. You may face additional costs like rent or daily carrying charges on your new home until the old one sells. Some programs may require you to use their mortgage lender or agents, limiting your ability to negotiate better rates and commissions. Finally, cash offers might be delayed if your home doesn't sell quickly, requiring you to cover ongoing mortgage and utility costs.
With Clever Offers, you can sell your house for cash in as little as 1–2 weeks without sacrificing your equity. Start with a free home valuation from a top local realtor. Then compare offers from leading cash buyers, iBuyers, and more — with no hidden fees or obligation to move forward.
Get Cash OffersHow much do buy-before-you-sell cost?
Buy-before-you-sell companies charge a service fee, usually a percentage of the old home's sale price. Some also charge loan origination fees and rent. On top of these fees, you’ll need to pay closing costs just as in a normal transaction.
Every company structures its costs a little bit differently, but the most common costs usually include:
- A service fee. The company charges a percentage of the purchase price for you to conduct the trade. Sometimes this includes the agent's commission, and sometimes it doesn't.
- Closing costs (buyer and/or seller). You'd also be responsible for these in a typical real estate transaction. With a trade-in service, you sometimes have to pay your closing costs as a buyer, 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. Remember 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 buy-before-you-sell services charge rent daily or prorated monthly until you close on the sale of your old home.
- 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 for using a buy-before-you-sell program typically come out of the sale proceeds of your home. This means you don’t pay upfront and you'll only have to pay cash out-of-pocket if the costs exceed the profit from the sale.
Alternatives to buy-before-you-sell programs
Using a buy-before-you-sell service is convenient, but it's not the only way to buy a new home and sell your old one simultaneously.
Work with a traditional agent
Experienced real estate agents often have strategies to help you buy before you sell, including negotiating contingencies. For example, an agent can ask for a sale and settlement contingency when presenting an offer to a seller. If the seller accepts the terms, they'll agree to wait for your home to sell before closing on the new house.
Working with a traditional agent ensures you have someone advocating for you during negotiations, which can be especially important and complex when you’re trying to buy first and sell later. That said, unlike with some buy-before-you-sell companies, you’ll have to accept that there’s always some risk that your agent might be unable to find you a house you want with the sort of contingencies you need to buy first.
If you work with a realtor, consider opting for a well-rated low-commission brokerage. That way you’ll get the expertise of an experienced agent with the added benefit of saving on realtor fees.
Looking for an agent? Try Clever's free agent-matching service and list with a top local agent for only 1.5%!
Sell to an iBuyer
An iBuyer company, such as Opendoor and Offerpad, uses technology to make a cash offer on your home in 24–48 hours. While they won’t offer as much as you’d get on the open market, they offer a quick, convenient sale and usually let you choose your closing date. So you can continue to live in your house while looking for a new home.
There are some disadvantages with iBuyers. They charge a service fee, usually around 5%, and will deduct costs for estimated repairs, which could increase the price. These costs are in addition to typical closing costs, ranging from 1–3%. Since you also won’t get the funds from the iBuyer until you actually close, you may still need to arrange financing for a downpayment on your new home.
With Clever Offers, you can sell your house for cash in as little as 1–2 weeks without sacrificing your equity. Start with a free home valuation from a top local realtor. Then compare offers from leading cash buyers, iBuyers, and more — with no hidden fees or obligation to move forward.
Get Cash OffersApply for a bridge loan
A bridge loan is a short-term loan designed to help you purchase a new home before your current one sells, although it can also be used to pay off your current mortgage or for home improvements to get your house market-ready. Most buy-before-you-sell programs offer some form of bridge loan, but you don’t need to rely on these companies to get one. Many lenders offer them, so you’re free to shop around.
While other lenders may be able to offer better rates than what buy-before-you-sell companies offer, those rates will still be higher than conventional loans. So you’ll want to sell your house quickly to avoid expenses.
As Warner Quiroga, President/CEO of Prestige Homebuyers, says, “Bridge loans are sort of like an adrenaline rush –it can help you to purchase the new place before you can sell the old one. You just have to be ready that the interest rates will be higher.”
You’ll also need significant equity in your home to qualify for a bridge loan. Lenders also usually only provide bridge loans to those with excellent credit and a low debt-to-income ratio.
Request a home sale contingency
A home sale contingency is part of a purchase agreement where you agree to buy the property, but only if you sell your current property by a certain date. Similarly, as a seller, you can have a contingency that states you’ll sell a property to a particular buyer contingent upon you being able to purchase a new property by an agreed-upon date.
Martin Orefice, CEO of Rent To Own Labs, says, “The simplest, most straightforward way to handle [buying and selling at the same time] is to wait for a time of year when the market is hot, focus on buying first, and make sure there's a contingency in your offer to allow for the sale of your previous home.”
However, not all sellers will be willing to entertain a home sale contingency, especially if they’re in a market where another buyer is likely to offer a more sure closing. Some types of home sale contingencies also allow the seller to accept a better offer than they receive before you sell your old house.
Take out a home equity loan or line of credit
Home equity loans and home equity line of credit (HELOC) are two types of loans that use your home’s current equity as collateral. The difference is that with a home equity loan, similar to a second mortgage, you make fixed payments on the loaned amount and are usually charged a fixed interest rate. A HELOC is similar to a credit card where you have revolving credit with variable interest rates and variable minimum payments.
You can use these types of loans however you want, including for a downpayment on a new home or for improvements to your current home to increase its market value. Since these loans are secured using your current property, they come with lower interest rates than unsecured loans, such as credit cards.
However, home equity loans and HELOCs can be risky if you default, in which case you could lose your home completely. Their flexibility can become a disadvantage if you have trouble controlling your spending and use your loan for expenses that have nothing to do with buying a new home.
Negotiate a lease-back agreement
A lease-back agreement (also called a rent-back agreement) is a home sale where the buyer agrees to purchase your home, allowing you to continue living in it as a tenant. While living there, you can search for a new home to buy.
After you sell, this setup takes some pressure off of finding your new dream home as quickly as possible. Because you’ll no longer own your old property, you won’t risk having to pay double mortgage payments on your old and new houses.
However, you'll likely have to pay rent to continue living in your sold house. Alternatively, the buyer may demand other concessions, such as a lower sale price. Lease-back agreements prevent the buyer from moving into their new property right away and force them into the role of landlord, so many buyers will refuse to offer them, which means you’ll have a smaller pool of potential buyers.
Ask for a longer closing period
You’re free to negotiate an extended closing period when buying a house. A longer closing period will give you more time to sell your house, knowing that once it does sell, you’ll have a new house ready to move into. You can also use the extra time to more easily align the closings on both transactions.
However, sellers aren't obligated to agree to an extended closing period. If you're in a seller's market, you may have trouble finding a seller who a delayed closing will entice. Alternatively, they may only be willing to provide one in exchange for concessions, such as a lower sale price.
FAQ
Can you buy a home before yours is sold?
Yes, buy-before-you-sell companies use the equity in your current home to help you buy a new home first. Once you have moved into the new home, you can focus on selling your old home. Find out more about buying and selling at the same time.
Can I make an offer on a house before mine is sold?
Using a buy-before-you-sell service like Orchard or Knock, you can make an offer on a new home before selling your current one. These companies use the value of your current home to help you make a strong offer on a new home, entirely in cash in some cases. Find out more about cash offer companies.
Should I pay off my mortgage before selling my house?
Most people don't have their mortgage completely paid off before selling. You can sell your home first, use the proceeds to pay off the mortgage, and put a down payment on a new home. If you want to buy first, buy-before-you-sell companies can help. Find out more about how you can buy a new home before selling your old one.