Buy or Sell First?
Are you a current homeowner with the goal of purchasing a new home? Chances are you need to devise a strategy in order to execute this goal. Maybe you’re asking yourself, should I wait to find the perfect new home before placing my current home on the market or should I sell first and then shop around? Actually, you have a few options. Here, you can discover what might be best for you.
Thinking of selling first?
There are numerous benefits to selling your current home before hunting for your next one. First and foremost, selling first enables you to know exactly how much money you have to work with. With a solidified price range, you’ll be able to narrow the pool of homes prior to searching and negotiate accordingly. This will enable you to instantaneously make firm offers on homes you’re most serious about purchasing. Be the first in line, so to speak, with an unconditional offer you’re able to afford. An unconditional offer grants even further negotiating leverage as Sellers tend to take them more seriously. Once 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 firmer offer after they have sold their current home. However, if you make an unconditional offer, the Seller generally gives you more consideration as they realize you’re probably looking at other properties and will more than likely move on if your offer is rejected. Similarly, if you have already sold your home, you likely have a broader opportunity to look around, negotiate and find the best deal and fit for you and your family.
On the contrary, if you don’t find the perfect property before the closing date of the house you’ve sold, you may have to find temporary housing until you’re able to find what you’re looking for. So, before opting to sell first, you should determine whether you have alternate, temporary options in case you have to move from your house before you’ve found a new one. For example, do you think you and your family would do well living in a transition home for an indeterminate period of time?
Thinking of buying first?
Buying a new home prior to having sold your current one may happen if you are interested in a particular property and will only sell your current home if this property becomes available on the market. It may be a matter of timing, laying hold of the home before it’s too late. Likewise, this could be said of a property you weren’t necessarily eyeing, but one that catches your attention due to its uniqueness or mind-blowing price. If buying first means you don’t miss out on the real estate opportunity of a lifetime, it may be the best move.
Nevertheless, be careful. If you buy another property and aren’t able to sell your current home quickly enough, you could end up having to finance both homes and assume the extra debt until you sell. Sure, you can get a financial appraisal or market evaluation of a home prior to selling, but this doesn’t guarantee the price you’ll 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, especially if your budget is tight.
Therefore, you should make sure you’re familiar with all aspects of the financial reality this scenario would generate before you purchase another home. You may be faced with owning two homes at once which could be a financial strain to you and your household. This could potentially force you to sell your home at a reduced price in order to align the closing dates of your two properties.
Still not sure?
An additional option you have is to make a conditional offer. This is when you make your offer to purchase conditional upon the sale of your current property within a specified period. These 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’ve 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 kind of middle ground, an area of compromise for those who are afraid to sell or buy first, but it doesn’t hold the advantages of the other two options.