Buy Before You Sell Florida

The two problems you are solving

Buying first creates two separate problems, and each tool solves one or both of them.

• Cash: most of your down payment is probably sitting in the equity of the home you live in now. You need a way to reach it before the sale closes.
• Qualifying: the lender for the new home will count your current mortgage payment, taxes and insurance in your debt-to-income ratio unless the old home is sold or under contract with conditions met. Carrying two Florida insurance premiums and two tax bills, even briefly, can push you over the limit.

Write down both numbers before you start: how much cash you need at closing, and the total monthly cost of owning both homes for six months. That tells you which tool fits.

This isn't legal or tax advice. The loan options below change often, so confirm terms with a lender and have your agent and, if needed, a real estate attorney review the contract language.

Option 1: a home sale contingency

The Florida Realtors contract forms include a rider that makes your purchase contingent on selling your current home by a set date. If your home doesn't sell in time, you can cancel and get your deposit back under the rider's terms.

It costs nothing in interest. It costs you leverage. Many sellers turn down contingent offers or accept them only at a higher price. Sellers who do accept often add a kick-out clause, which is a separate rider: the seller keeps marketing the home, and if another buyer makes an acceptable offer, you get a short window to remove your contingency or step aside.

A sale contingency works best in a slower market, on a house that has been listed for a while, and when your own home is already listed and priced to sell. Statewide values are down 0.9% over the year and condo values down 3.9%, and in that kind of market more sellers will at least consider one.

Option 2: a bridge loan

A bridge loan is short-term financing secured by your current home. It lends against that equity so you can make the down payment on the new one, then gets paid off when the old home sells. Terms are typically months, not years.

• Pros: you can make a non-contingent offer, which sellers prefer.
• Cons: higher rates and fees than a standard mortgage, and you may carry three payments at once for a period: old mortgage, bridge loan and new mortgage.
• Watch: the bridge loan's term. If your home sells slower than planned, ask what happens at maturity.

Bridge loans are less common than they used to be, and lenders that offer them usually want strong credit and substantial equity. Some lenders and companies also offer programs that buy your old home or guarantee its sale price so you can shop as a cash-style buyer. Read the fees carefully; the convenience is priced into them.

Option 3: tap your equity before you list

A home equity line of credit or a cash-out refinance on your current home can fund the next down payment. The timing matters: most lenders won't open a HELOC on a home that is already listed for sale. If you think you'll buy first, apply before the sign goes up.

A HELOC usually has lower upfront costs and you pay interest only on what you draw. A cash-out refinance replaces your existing mortgage, which can be a bad trade if your current rate is low. Either way, the new payment counts in your debt-to-income ratio for the purchase loan.

Retirement accounts and taxable investments are other sources. Withdrawals can trigger taxes and penalties, so get advice before you move money.

Option 4: qualify for both homes

If your income is strong enough to cover both payments on paper, you can simply buy with a new mortgage and sell later. Some loan programs require a smaller down payment when you can qualify with both payments counted. Your lender can tell you whether your income supports it once Florida insurance and property tax are added for both properties.

This is the cleanest offer to a seller. It is also the riskiest if your current home takes longer to sell than expected, so keep reserves for several months of double payments.

Closing on both sides: timing and occupancy

Many Florida buyers line up a simultaneous or back-to-back closing: the sale of the old home and the purchase of the new one close the same day or within a few days, with sale proceeds funding the purchase. Title companies handle this routinely, but any delay on the sale side stops the purchase. Build a few days of cushion into the closing dates and confirm both title companies can coordinate funds.

Another option is a post-closing occupancy agreement on the home you sell, which lets you stay a short time after closing while the new home closes or is readied. Put the terms in writing: how long, who insures what and what happens if you stay late.

Remember costs on both sides. As a seller, you normally pay documentary stamp tax on the deed of $0.70 per $100 of price ($0.60 in Miami-Dade). As a buyer with a loan, you pay $0.35 per $100 on the note and 0.2% intangible tax on the mortgage.

Homestead when you change homes in Florida

You can hold only one homestead exemption. When you move from one Florida homestead to another, apply for homestead on the new home by March 1 of the year after you move in. Florida's portability rule lets you transfer up to $500,000 of your accumulated Save Our Homes benefit to the new homestead if you establish it within three years of leaving the old one, which can cut your new tax bill a lot if you've owned the old home for many years. You file for portability with the same application.

If the new home is a second home and you keep your homestead on the current one, the new home is taxed as non-homestead, with a 10% cap on non-school levies. Once you know which option you qualify for, a shortlist of homes that fits that cash and payment plan keeps the search realistic.