One of the most common issues today for move-up home buyers/sellers is also one of the most difficult to overcome.
To get the best deal on a home purchase, you will likely need to be able to buy it without being "contingent" on selling your current home. With all of the competition home buyers face, a non-contingent offer may even be your ONLY chance of getting an offer accepted. Also, if you are buying a bank-owned foreclosure (REO) or Short Sale (SS), your only option is non-contingent. (Side note: when I refer to contingent and non-contingent offers, I am referring only to the sale of a current residence prior to buying. I always recommend having loan, appraisal, and inspection contingencies built in to the offer. This discussion is only about to the sale of a current residence as a contingency to purchase). There are no easy answers, but you do have options.
1) Many people elect to sell their current residence and move to a temporary location (such as with a friend or family member, extended stay hotel, or even a short term rental). The benefits are clear. You will know exactly what you can budget for the new home as there is no wondering what your final net proceeds will be from the sale of your current home. You are also in the strongest of positions and ready to go once you find that perfect (for you) home to purchase.
The drawbacks are also clear. What if moving in with a friend or family member is not an option? Or sometimes, people do not have the stomach for a multiple move situation. Some have the feeling of being "home-less" with this idea as well.
2) You can also try to stay away from SS's and REO's, and write contingent offers only on those properties that are "regular" sales. BUT, depending on price range, location, and exact market conditions at the time, it can be difficult to find the right house by removing a significant chunk of the market. Unfortunately, many "regular" sellers are wary of contingent offers as well. It can be done, but it is not easy.
3) For those buyers who have the ability, there is the option of buying non-contingent and then selling your existing house once the new one closes escrow. If possible, pull equity from your current home for the down payment on the new one. Liquidating some assets to put together your down payment can sometimes do the trick. Of course, not everyone has the financial ability to do this, and there are some risks (i.e. what if your home takes longer to sell than you anticipate? or what if you get less than you were expecting?). It is the opposite of feeling "home-less" like in the first scenario. You would actually own two homes, and there will be a cost of carrying two mortgages, etc. Renting out the existing home while it is listed for sale can help off-set some of the costs, but you would have to find the absolute right renters.
4) The lowest "risk" option that some people choose is a combination of sorts. While looking for the right home to purchase, many opt to list their home with a seller contingency. In other words, your agent indicates on the MLS that "Sale is Contingent on Seller Securing Suitable Replacement Property." Most sellers will allow a buyer to purchase contingent upon a successful close of escrow (once it is in escrow), even many banks. Everything needs to get timed just right, and it will be the result of a lot of skill from your agent, diligence on your end, and a little luck. The main downfall of this strategy is that some buyers could be turned off by the proposition of falling in love with your home, with the risk that they may never be able to buy it (if you don't find that suitable replacement property). You are at a disadvantage with non-contingent buyers in a competitive situation, but at least you give yourself a chance.
As I said in the beginning, this common issue can be difficult to overcome. There is no "right way" or "wrong way." It all comes down to what is right for you. You will need to weigh the risks vs. reward. Weigh your options. Talk with some friends and family members to see if a temporary stay with them is even an option. Talk to your agent. Look at your specific market conditions.
This is a wonderful move-up market. The extra work can really pay off.