There’s a persistent narrative in the real estate industry – and among buyers and sellers – that buying and selling property at the same time is a no go. These are referred to as ‘dual property transactions.’ And people give a lot of reasons for why they’re a bad idea.

• It’s a challenge logistically to manage the process.
• It’s a challenge financially to fund each transaction.
• And it’s a challenge emotionally to make logical decisions when there’s so much pushing and pulling on you.

But though there is some truth to this reasoning, there are also some rewards to be had in dual property transactions. Let’s dive in.

What is a dual property transaction?

A dual property transaction is simply when a single party buys and sells property at the same time. It’s also called ‘simultaneous settlement’ or ‘concurrent settlement’. Interestingly the buying and selling doesn’t have to happen at exactly the same time – but it does happen within a relatively short time frame.

Pros and cons of a dual property transaction

Of course, there are some upsides and downsides to these types of transactions.

Downsides

The downside is that these types of transactions are complex. They require careful coordination, particularly because you will be dealing with multiple parties with varying timings and many different requirements to meet your contract obligations. For example, there will be two sets of pest inspections, two sets of lending documents, two sets of covenants to meet and more!

For many people, the financial side can be challenging as well. You have to ensure that you have enough money – or the financing in place at precisely the right time – to fund your purchase.

You will certainly need to have a deposit for your new purchase – which is generally about 10% of the purchase price, though if you have 20% you will not need lenders mortgage insurance. You will also need to cover settlement costs which can be as much as 5% of the total property cost. You should also factor in stamp duty costs for the purchase, and other taxes like capital gains tax, for sales.

If you do have equity in your current home, then this can be used to cover both the deposit and sales costs. However, if you’re relaying on money coming in from the sale of a property first, and this doesn’t happen, you may need to be prepared to get a bridging loan.

Emotionally, dual transactions can also be challenging. All property transactions, particularly when you’re buying and selling a family home, are an emotional rollercoaster, with highs and lows. But when you’re combining two – the selling of a beloved home and the purchase of your next one – these feelings can be amplified. It takes confidence and clarity to get through these transactions without feeling overwhelmed.

Upsides

The biggest upside from a dual transaction are that they allow you to transition from one property to another smoothly and without the need to find housing in the interim. So there’s no need to rent another property for any length of time, which saves you money, of course, but also inconvenience.

Financially, when you’ve got the timing right, the funds from your sale can pay out your mortgage with any balance going towards your new purchase. And, if you’ve got pre-approval from a lender, and a guaranteed sale, you may also be in a better bargaining position and can score yourself a better deal.

You may also be able to save yourself some administrative expenses. A simultaneous settlement can be very cost-effective as you may be able to get reduced costs associated with multiple settlements from real estate agents, conveyancers and lawyers.

What is the process of buying and selling property at the same time?

If you’re considering buying and selling property at the same time, it can certainly be done! However, the process will take meticulous planning and coordination.

The best approach to ensure that you’re getting all your ducks in a row is to:

1. Seek the help of a real estate agent or buyer’s agent (or both!) who can help you with the process and who has experience with dual transactions.
2. Get your financial pre-approval in place. Our team can help!
3. Ensure you understand the process of financial settlement. Speak to our team about gaining access early to your equity or a bridging loan to ensure you’re across all the contingencies.
4. Be aware that in Queensland (and many other states), a party can request a five-business-day extension on settlement.
5. Have back up plans in place!

Your back up plans

When you’re buying and selling at the same time, it’s a really good idea to be prepared with back up plans, just in case the other party doesn’t meet the timing or there are any other issues.

• Rent back arrangements. If your sale will settle prior to your purchase coming through, you could negotiation a ‘rent back’ arrangement. This is where you ‘rent back’ the property after the buyer buys it so that you can stay in the home in the interim. The term of this arrangement is usually three to six months.
  
• Bridging loans. If your purchase comes through prior to your sale, and you don’t have enough cash to cover the purchase without gaining access to the equity in the home you’re selling, you can consider a bridging loan. This loan will allow you to access funds to cover the deposit and settlement costs while you’re waiting for the sale of your current home.
  
• Other housing arrangements. You don’t want to be rushed into purchasing a property. So be sure to have alternative arrangements in place, such as a storage unit for your furniture and possessions, an Airbnb to rent or a place to stay with loved ones in the short term. Speaking to people about this before it becomes urgent gives you the space to make smart decisions about your property purchase.

We're here to help

If you’re keen to give a dual property transaction a go, get in touch with our team. We can help you with preapproval and financing from more than 40 of Australia’s biggest banks and specialist lenders. And we can help you navigate the entire process, ensuring you get the best deals and terms for both your sale and purchase.

Give us a call today at Lending Loop.