So you want to move to a new home but you already own a home. What is the best way to orchestrate this move? Should you start by looking at houses you would like to buy or focus on selling your home first? The mere thought of this dilemma can be paralyzing to many homeowners. This blog post will map out all of your options and the pros and cons of each so you can make a well thought out game plan.
Option 1 – Sell First Then Buy
Selling your existing home first is the least risky as you don’t have to worry about carrying two mortgages at the same time but you really can’t start seriously looking at homes to buy until you at least get your existing home under contract. Once you get it under contract, you may have to be out fairly quickly and you will be under a lot of pressure to find something quickly or move into some kind of temporary housing (effectively moving twice). Making offers that are contingent on the sale of your place may work in some markets but will not likely work in today’s market (at the time of writing this post) as it is extremely likely there will be multiple buyers interested in the home you want and the sellers will always choose the offer that doesn’t have the added risk of falling through due to you not being able to sell, etc. Banking on the timing working out perfectly to move directly from one house to the other is also not realistic. It is great when it works out like that and you can hope and try for it; but you will definitely need a plan B in place in case it doesn’t work out in such an ideal way. It is also important to consider how inconvenient it can be to have your home shown to potential buyers while you are still living in it.
Option 2 – Buy First Then Sell
If you are fortunate enough to be able to qualify for financing of your new home without selling your old home first then you have another possible option: Buy first and then sell. By doing things in this order, you get the luxury of home shopping without as much pressure of having to find something quickly. You will enjoy being able to move only one time; directly from your old home to your new home and perhaps save on moving costs. When selling your home, you won’t have to put up with the annoyance of having strangers interrupt your day and trample through your home at dinner time or disrupting the kids nap time, etc. and you won’t have to always worry about whether your home is clean enough to show. Clearly, this is the much easier and less stressful way to do things; but it comes at a price. Many people think the price is that they are taking the risk that they may not be able to sell their old home at all and may get stuck with two mortgages perpetually. The truth is, you can relax a little. Your old home will absolutely sell. The only thing you don’t know is the exact price it will sell for. So, there is risk that you may get less for your home than you anticipated but the risk of not being able to sell it at all at any price is not really a true risk. Every home will sell and sell quickly at the right price.
If you can’t qualify for financing on a new home without selling first then your choice is easy as it is made for you. If you can qualify to buy first then you need to look at whether you absolutely need the equity out of your existing home for downpayment money on the new home and whether you feel comfortable having some overlap for a few months with 2 house payments.
If you are wealthy enough to put together a down payment on a new home without using the equity in your existing home and you have enough cash flow or savings to float both homes for at least 6 months without completely draining your savings then I would recommend the Buy first approach. The reason is that it is a lot easier and more enjoyable experience. When all is said and done (after you sell your old home), the outcome will be nearly identical as will your financial standing. You will be comfortably in your new home and your old home will sell for the same exact market value. The only thing you really lose is the ability to know exactly what the net proceeds from the sale of your existing home will be in advance; but the net proceeds will be ultimately be the same in hindsight whether you buy or sell first so the financial outcome really is identical and you get there with much less stress. A good real estate agent should be able to give you a range of what your home will likely sell for in a worst case and best case scenario. I suggest you use the worst case scenario price in your decision making and don’t use a number given to you by an agent who is trying to tell you what you want to hear to “buy” the listing. If you want a real, honest best to worst case price range expectation for your home, please give me a call today and I will be glad to provide one fo you.
This choice can be a difficult one for those who have all of the options to pick from and there is not always a right or wrong answer. No matter which way you decide, it is important to make this decision early in the process because if you don’t think through this part and have a game plan, you will spin your wheels looking at homes you may not be able to buy and get frustrated as you find your dream home and perhaps don’t have the means to make it yours, etc.