Do I need to Sell My Home First, Before Building a New Home?

As home builders with decades of experience, we’ve witnessed the trouble not selling your current house can bring to the new home-build process. Therefore, we do recommend you sell your home first, if possible. Countless things can go wrong if you try to build on contingency (sale falls through, the sale/build takes longer than planned, something happens to the house before it sells, etc.). There’s also the stress of paying a main mortgage and a bridge loan, construction loan, or HELOC (home equity line of credit) while trying to pack up, sell your house, and be active in the new construction process.

If you sell your current house and then start building, you can store the stuff you don’t utilize and secure temporary housing, which is much easier than it used to be due to the prominent short-term rental market. Though seemingly inconvenient, CMS Homes’ clients who do this are always thankful they chose this route. It is less stressful, offers peace of mind, and they enjoy the home-building process more. Our CMS team also has reliable storage and short-term housing resources — ask your builder about these resources too.

When selling first is not an option, there is a way to make the sale-to-build process less stressful and affordable, as discussed below.

How to Sell Your Home While Building a New One

Suppose you simply can’t sell your home before building a new one. In that case, the keys to a successful transition between a home sale and a new build are organization, realistic expectations, arranging final financing well in advance of listing your current home, meeting with builders, and staying very active in both processes. Do not let any details slip by unnoticed.

When Selling Your Home While Building: Plan & Create a Timeline

Creating a plan with a realistic timeline is the first step to simultaneously selling your home and building a new one with as few surprises as possible. To start planning, answer these 12 questions.

1. Have you met with and chosen a mortgage broker?
2. Do you have a 20–25% downpayment for the new home and/or land?
3. Do you need a bridge loan or another type of financing to start building?
4. How long will the mortgage process take?
5. How long will it take to buy land to build on?
6. How long will it take to sell your home?
7. How long might you need to stay in your home if you sell before your newly built home is ready?
8. Are you building a completely custom home or a semi-custom home?
9. How long does your preferred builder take to finish a house (average is 7–8 months)?
10. Do you need to hire an architect and designer or does your builder offer that service in-house?
11. Do you need to hire an interior designer or does the builder offer that service in-house?
12. Would you be open to building on a lot in a builder’s community to speed up the process?

When Selling Your Home While Building a New Home: Create a Budget

Before diving into building a new home, assess your current financial situation. Review your income-to-debt ratio, existing mortgage terms, outstanding balance, proposed payoff amount, and monthly payments. Determine how much equity you’ve built up in your current home and evaluate your overall financial health. Do you have a down payment ready?

Next, calculate your monthly budget and determine how far you can stretch to stay in your home while building a new one. Typically, the only way to know this with certainty is to meet with a reputable mortgage broker. A broker will look at multiple factors you wouldn’t necessarily know about to ascertain what you can truly afford and which financing options are best for you — a construction loan, bridge loan, HELOC, or selling first, before building.

Find Your Dream Team to Help Sell Your Home & Build a New Construction Home

This is a step we cannot emphasize enough! Find your dream team to help with the home-selling and home-building process. Selling your current home and building a new construction home will sometimes be challenging and other times exciting but a knowledgeable real estate broker, a local mortgage broker you can get to know and trust, and an expert builder will help provide a carefree experience. Look for professionals with a proven record of selling homes in your area and proficiency with new construction transitions. Realtors, builders, and lenders who understand this process offer valuable guidance, expertise, and support, and reduce your involvement as much as possible so you can carry on with life.

When is the Right Time to Start Building a New House if You Have to Sell Your Current House First?

If you have created a plan and timeline, saved for a down payment, and received written financial approvals from a mortgage broker, whether you have sold your home or it’s on the market, now is a good time to meet home builders and start the building process.

Select a reputable builder, one you connect with who will build your dream home to your specifications. When you receive an estimate, request a reliable “build timeline” with contingencies in the schedule. This timeline will help you narrow your selling options. For example, in Lincoln County, Missouri, homes sell fast, so, depending on your unique situation, it might be wise to wait until your new home is under construction to list your current home for sale. In the sales contract, you can detail your plans to stay in your home for a short time after it sells (a leaseback) or go the traditional route and be out for the new buyers by closing day, which in our area of MO, is likely within 60-75 days.

If you have already sold your home and have a financial commitment from a lender, by all means, start the building process and plan for a move-in date up to eight months out.

Building a New Home While Selling Your Current House

Deciding to build a new home while living in and selling your current home can be daunting but a well-planned, timed, and executed process paired with an experienced real estate, mortgage, and building team, allows you to navigate this exciting endeavor more easily. The bottom line is that you have the power to make the home-building process work for you and fulfill your dream of living in a beautiful, newly constructed home customized to your specific style. Go for it!

If you are in the Troy, MO, area and would like to build a semi-custom home, let us know how we can help. CMS Homes is a one-stop building company with in-house designers, architects, builders, and closing coordinators, along with a wonderful team of resources to help you with every step of the process.