Buy First or Sell First?
There are several benefits to selling your current house before searching for your next home. If you sell first:
- You will know exactly how much money you have to work with.
- You will be able to narrow the search of houses you are interested in before you begin looking, and negotiate accordingly.
- You will be able to immediately make a firm offer on a house that you are serious about purchasing. You can be first in line with an unconditional offer that you know you can afford. Sellers tend to take unconditional offers more seriously. When the Sellers counter or turn down an offer that’s conditional on the sale of a home, they usually think the Buyer will come back with a better and more firm offer once they have sold their current home.
- When you make an unconditional offer, the Seller will usually give your offer serious consideration. They realize that you are likely looking at other properties and will move on if your offer is rejected.
- You are in a much stronger negotiating position to find the best deal and fit for you and your family.
On the other hand, if you don’t find the right property before the closing date of the house you’ve already sold, you may have to look for temporary housing until you do find what you are looking for. Before you decide to sell first, you should determine whether you have a temporary option, in the event that you have to move from your house before you’ve found a new one. How would you and your family deal with living in a transition home for an undetermined period of time?
Buying a new house without having sold your current home may occur if you are interested in a specific property and will only sell your current home if this property comes on the market. It may be a matter of timing – purchasing the home before it’s too late. The same might be said of a property you haven’t had you eye on previously, but catches your attention due to its uniqueness or unbelievable price. If buying first means you don’t miss out on the real estate opportunity of a lifetime, it may be the best move for you.
However, if you buy another property and aren’t able to sell your current home quickly enough:
- You may be faced with owning two homes at once, and having to carry the additional debt until you sell.
- You can get a financial appraisal or market evaluation of a home prior to selling, but this does not guarantee the price you will ultimately receive for the home after the negotiation process has run its course.
- Since your selling price will be an unknown, jumping into a purchase could be a gamble, particularly if your budget is tight.
- What type of financial stress would this bring to your life and how would you deal with it?
- Consider the fact that if your current house doesn’t sell quickly enough, you may be forced to sell it off at a reduced price in order align the closing dates of your two properties. What effect would this have on your financial situation?
An additional option involves making your offer to purchase conditional upon the sale of your current property within a specified period. Conditional offers usually include a clause that allows for the Sellers to keep their property on the market and remain open to other offers while you try to sell your home. If the Sellers receive another attractive offer before you have sold your home, they may accept and ask you to either remove your condition and firm up your offer, or to back down from the offer.
A conditional offer forms a middle ground, an area of compromise, for those who are afraid to sell or buy first. Unfortunately, this does not hold the advantages of the other two options. However, the drawbacks of the conditional offer are:
- Sellers tend to take them less seriously. They definitely give stronger consideration to firm offers. This leaves you with less negotiating power.
- Some Sellers will simply turn down or counter a conditional offer. Other Sellers will believe the Buyer will come back with a more serious offer once their home has sold.
- You may end up having to increase your offer in order to have your conditional offer accepted and keep your foot in the door of your desired house.
- Even if your conditional offer is accepted, there is no guarantee another Buyer won’t step in and overthrow your offer before you have sold your current home, which would put you back at the starting line.
- Also you cannot withdraw your conditional offer until the end of the period specified in the contract—which means that if a better deal comes along, you will have to wait to jump at it.
Whatever decision you choose, working with a Realtor® will assist in making the process smoother.