Simultaneously buying one home and selling another can be tough.

In a hot market it's often a deal killer to include in your offer to buy a new home, a contingency to sell your existing home. Sellers will simply take their pick of offers not burdened by such a contingency.

On the other hand, if you sell your existing home first without signing for a new one then you could wind up temporarily homeless or spending exorbitant amounts on hotel rooms or other high-priced temporary quarters.

You do have some alternatives.

The best-case buy-and-sell scenario is for those who can afford to own two homes -- if only temporarily. Those who can are able to put market cycles to work for them and actually reap a financial return in the process.

Buy-low, sell-high

Most markets have up and down seasonal cycles when buyers and inventories tend to push prices up or down. In regions with the four traditional weather seasons, buyers come out of hibernation in the spring. If they have kids, they hope to settle back in before school starts in the fall.

That general trend tends to push prices up during the spring and summer months and down during the fall and winter.

Buyers get the most for their money when most of the market is glazed in a sugar-plum haze; there are fewer competing buyers and sellers are more motivated to sell. In recent years, mortgage rates also have trended lower during the cooler months effectively stretching your buying power.

So buy your new home when it's cool and hang onto your existing home until the spring thaw or later when buyers are more motivated.

If you can carry two mortgages for a few months to half a year, you'll benefit financially from the best of both worlds.

Rent back

For those who can't afford to own two homes, a more common move-up strategy is what's called a "rent-back."

In a rent-back, the seller sells the home but stays put, paying rent to the new buyer. The rent is typically the same as the new buyer's mortgage payment, including principle, interest, taxes and insurance.

The deal is useful when the seller is waiting for a newly built home or knows he or she is about to close or enter escrow on another home.

Rent backs can be as long as 60, 90 days or longer -- but not much -- whatever is agreeable to both parties. The contracts, which can be an addendum to the sales contract, are written like month-to-month rental contracts with a 30-day or shorter notice of cancellation should the move-up buyer's new home become available sooner than expected.

The approach works best in hot markets, when inventories are low, or during peak buying periods. During these times, sellers typically have fewer problems finding buyers willing to put up with a move-in delay, especially when the seller is effectively paying the mortgage during the rent-back period.

The rent-back also eliminates the need for a sale contingency, which puts the move-up seller's offer to buy in the best light.

While the sale leg of the transaction may not be a problem in a hot market, the key to making the rent-back work, of course, is finding a new home to buy within the rent-back period -- perhaps not an easy task in a hot market.

Move-up buyers should be preapproved for a guaranteed loan amount for their new home and if no specific home is in sight, should attempt to determine, in advance of signing a rent back, if a move-up home is attainable.

Plan B

A back-up and much riskier strategy is what's called a "bridge" or "swing" loan.

Using your existing home as collateral, you take out a bridge loan for three months to five years to use as the down payment on your new home. Once you've purchased your new home, you sell the old one and pay off the mortgage and the bridge loan.

Such a loan is less risky in a fast appreciating market where appreciation can cover the extra payment on the old home.

Even in the best market, however, swing loans can be expensive, last-ditch propositions that are fraught with caveats.

Typically funded with private money from investors, bridge loans can cost 5 to 10 percentage points more than a typical equity loan. Your home must be lien free. Excellent credit is mandatory, as are good income-to-debt ratios.

It may be a better idea to get a cash-out refinance, second mortgage or equity loan to use as a bridge loan. Traditional financing is cheaper and less risky, but that could preclude you from landing another mortgage for a new home should the lender consider you stretched too thin.

In all three cases, examine your tolerance for risk and consider a combination of the strategies mentioned above as yet another alternative.

Published: November 5, 2004

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the Web site, DeadlineNews.Com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for "Nolo's Essential Guide To Buying Your First Home" (Nolo $24.99) and writes real estate television scripts for RealtyTimes.com.