Should you Buy or Sell your Home First?
Once you’ve decided you’re ready to move, it’s time to decide whether or not you are going to buy your new home or sell your old home first. It’s a tough decision so it’s important to weigh all the relating factors with a knowledgeable real estate agent prior to deciding. The keys to making the right decision depend on a few key factors: The market, your financial position, the risk you’re willing to take, and convenience.
If you can afford the down payment for your next home and can qualify for two mortgage loans at once, then buying your next home before selling is an option. For many people, however, the down payment on the next home will come from equity in the existing home. If you don’t have the money in the bank to finance both, you may qualify for a bridge loan, which could give you the ability to buy your new home first.
It’s important to determine if you are in a buyers or sellers market. A sellers market means that the real estate market favors sellers because inventory is low. A buyers market favors the buyer because inventory is high and buyers therefore have more negotiating power. Take a look at a recent market update to determine how favorable the market is for sellers and buyers.
When making the decision to buy or sell, a sellers market leans in favor of selling first. The reason for this is that if your house is already sold, you’ll have cash on hand to buy a new home. If inventory is low, sellers are more likely to receive multiple offers on their home. If your purchase offer comes with a contingency on selling your home, it won’t be as appealing to sellers.
Often people plan to put their home on the market once they find the perfect home, thinking that their home will sell quickly, making that plan viable. However, in a seller’s market, the home they fall in love with may be snapped up before they have an opportunity to get their home on the market.
If it’s a buyers market, waiting to sell your home until after you have bought a new home is more likely to be a realistic option. However, there are still other issues to take into consideration when choosing this route.
Depending on your personality, the thought of paying two mortgages at once may cause you anxiety even if you qualify. On the other hand, the thought of selling your home without a new home to move into may be a reason for stress. The process will be smoother if you have a good Realtor to help you evaluate options and realistic time frames.
Another consideration is whether you are okay with the possibility of moving twice if it means you can leisurely take your time to find your dream home. Financially speaking, selling your current home first often makes the most sense. The concern with this is that you might feel rushed to settle into a new home too soon. One possibility is to negotiate with your buyers to rent back your home for a month or two after escrow closes so you can locate and purchase your next home.
If you would like more information or advice on whether to buy or sell your home first, fill out the form below and we’d be happy to answer your questions.