Do you buy or sell first when you are ready to move?

Do you buy or sell first when you are ready to move?

Homeowners deciding if they're ready to move face a dilemma... should they buy a new home first and then sell their current home or should they sell their current home first and then buy another?

Ideally, we would close on your sale and purchase all on the same day; but it doesn't always happen like that. You can make an offer on your next purchase contingent on selling your current home; however, keep in mind if sellers receive multiple offers, they won't even consider yours. They won't want to waste their time on an offer that may fall through. Multiple offers on properties happen quite frequently, which only makes this an even tougher decision to make...

When finding an answer; there are several factors to consider: including local market conditions, financing options and how you feel about potentially moving twice if you sell your current home before your next home is available.

Let's talk market conditions...

In order to sell your home, we need to determine if your specific neighborhood is currently in a buyer's market or a seller's market right. Each individual neighborhood has a market of its own and we need to determine the supply and demand to see how quickly "like" homes are selling and for how much. We will then be able to determine a timeframe and which direction to proceed.

Now on the buying side, you should do some preview shopping to get an idea of what you want and how easy it is to find. For example, if you must live in a particular school district where the home inventory is low and properties are in high demand, new listings will sell very quickly. In a scenario like this, you may want to consider buying a home first to ensure you have "secured" the home you want when it is available.

Once we determine the market conditions on the buying and selling end, we'll have an idea of which direction to proceed.

Now what about financial options...

In an ideal world, everyone would have the funds to pay cash for their next home, but the reality is that most people need the equity from the sale of their current home for their down payment on their next house.

If you can qualify for the mortgage loan on both your current home and the next home, you can speak to a lender about accessing the equity in your current home with a line of credit. You'll need to take out the line of credit before you put your home on the market and then you can pay it back at closing.

You may also be able to borrow money for a down payment from relatives that you can repay after your home sells. Lenders need a paper trail on where money comes from in a down payment so you would want to discuss this option with a lender too.
Some lenders also offer bridge loans for transitioning homeowners as long as they have excellent credit and sufficient equity in their current home. A lender can help evaluate if this is an option as well.

What are the pros and cons...

You'll have to ask yourself what scares you most: selling first and having nowhere to live or buying first and being stuck with two mortgage payments. The answer depends on your finances and your local market, but in either case you should have a back-up plan to deal with the worst case scenario – either another source of income for those double mortgage payments or an identified place to live for a few weeks or months while you shop for a home.

(Keep in mind that you might need to pay for a storage facility for your possessions if you sell first. Additionally, a drawback to selling your home first is that you may be unable to find a home to buy, or you may feel rushed into taking a place that doesn't meet your expectations.)

Contact us today and we'll help you analyze your situation.