This is a work in progress; I'll update it as I progress through various stages.

Idiot's guide to buying and selling a home at the same time

I purchased my first home easy enough. I coughed up a 10% down payment plus earnest money, got pre-qualified, and put an offer on a new home; this was relatively easy and didn't involve any "are you kidding me" moments. The next time, though, I had to buy and sell at the same time. This turned out to be quite a learning experience for me. Now someone reading this might call me either dumb or naive; I'll confess to being both when it comes to this process. I finally understood the whole buying and selling process once I got my agent to send me a blank contract. I read the contract thinking about how I might offer this contract to a seller and thinking about how a buyer might offer that contract to me. I then asked my agent for a time-line of all the activities listed in the contract. After doing this, all the steps became very clear. Financing was a different story.

Offers Contingent on Selling

You must have access to the funds for a down payment on the new house or your lender will require you to make offers contingent on selling your current home. Lenders require that this be "your" money not money you are borrowing (e.g. from a bank, credit card, friend, or relative). An offer contingent on selling your current home is a very weak negotiating stance for you when making an offer. You might need to offer at list price or even above to get an offer accepted. One option is to let the seller keep the house on the market with a 72h right of refusal. That gives you 72h to get your lender to remove the contingency if the seller gets another offer. I think this only works if the home has been on the market a few months. Otherwise the chance of another offer is very high negating the whole point of the contingent offer (i.e. to give you time to close on your sale).

Down Payments

Specifically when selling your home to buy the next home, there can be all kinds of unique circumstances with the down payment on the new home. If you are trading up, you may be thinking about using the equity in your current home for the down payment. This generally doesn't work out too well (see above about contingencies). Depending upon your lender's motivation, they may or may not explain all the options. There are a number of things (e.g. stock, 401K, etc.) you might have that can be leveraged for the down payment, but keep in mind that the lenders expect it to be "your" money. I didn't realize that my stock portfolio could be collateral for a down payment, so long as I was willing to liquidate the portfolio if the worst should happen. I didn't want to sell the stock so I didn't consider it "cash". My lender didn't mention that I might be able to leverage it without ever selling the stock. My agent actually turned me on to this scenario. It works like this, you put your house on the market; you make offers to purchase another home without a selling contingency; if all goes well you time the buy/sell close enough that your lender doesn't make you actually put up the cash but rather uses the equity from the sale. There can even be a small (e.g. 30 days) overlap and most lenders will let it go through so long as the sale looks like a sure thing. Worst case you end up selling the stock for the down payment. Once your home sells, you take the equity and buy back into the market (just watch out for wash stock transactions if you do this quickly). Another option that "might" be ok (I haven't run this by my lender yet) is to borrow the down payment against your 401K. Then repay the 401K loan from the equity when your current home sells.

Agent Trust

Don't put too much trust in your agent; it is very important to make reasonable estimations of trust based on the agent's motivation. Remember your agent is going to make thousands of dollars from the sale. Agents are selfishly motivated to make the sale happen and +/- a few percentage points on the sale price doesn't change their commission much. An agent is more interested in making the sale happen than ensuring you get the best value for your money when either buying or selling. This behavior is not all bad so long as you understand it and make adjustments. It motivates the agents to convince the buyer and seller come to an agreement; this is a good thing. Just don't expect an agent to suggest you wait a week to stage your home for a better selling price. Waiting is not in their interest unless the agent thinks there is something serious that will turn off buyers. Also don't expect an agent to warn you about or to be completely honest when you ask about resell issues on a home you are purchasing. Resell issues on your new purchase will be the next agent's problem (and yours) 10 yrs from now. Lastly, they may try to cave in too early in negotiating the last points of the sale. It is their time vs. your money. This agent behavior also motivates them to show you 1 or 2 homes and try to get you to make an offer. Insist that they do their job and let them know upfront how many homes you might want to see before making an offer.

Don't think I'm bashing agents here. That is not my intent. There are many good agents out there that really look after their clients interests. The better ones come with lots of references you personally know. The better agents will be more careful with your money because they want you to tell your friends. Just don't be unrealistic about how much they are looking out for you and remember that even the best agent is motivated to make the sale happen.

Selecting the new home

I read this here while doing some research using Google. I'm an analytical person so this technique fits me well. The technique involves scoring the homes you visit. Make a list of things you want in a new home; then make a list of things you don't want. Score each home against the list and pick the one with the highest score. When scoring a home try not to score style but rather score substance. Substance is an attribute that can not be changed or will be very expensive to change (e.g. neighborhood, schools, lot location, HOA, room size, etc.) Style attributes are relatively cheap to change (e.g. paint color, wall paper, landscaping (small changes), etc.) If you really like simple math you can even weight each attribute differently.

Offer price

It can be really hard to make comparisons between homes because every home is unique. One of the best things I found was an appraisal on a home that was listed for sale in the area where I wanted to buy. This appraisal listed comparable homes and then added and deducted value from those homes for a whole list of attributes. This gave me a good way to make my own comparisons. For instance I now understood how much more a 3 car garage was worth than a 2 car garage; the price delta for each 1/2 bath; each extra sq. ft. of lot size, etc. I created my own spreadsheet and started adjusting the home I was looking to purchase to match the $/sq. ft. of comparable homes that already sold. Yah, your agent should be doing this..... and do expect your agent to help you with the process and the $ adjustments. Just remember don't put "too" much trust in your agent; make reasonable estimations of trust based on their motivation.