Need to sell your current home and buy another? Whether you’re a first time homebuyer or you’re ready to move into a different property, it can be challenging to time a move so the sales perfectly align. While every property transaction is unique, we’ve outlined the common pros and cons of selling a home first versus buying a home first.
Selling a home first
Congratulations, you sold your house! Now what? Here’s the inside scoop on the pros and cons of selling your home first.
- Upside: By selling first, you’ll likely feel more financially secure as you begin searching for homes to buy. It can be helpful to know what kind of money you’ll walk away with at closing so you can set a responsible budget for house #2 and feel confident that you can get approved for your next mortgage loan.
- Downside: There’s more to think about than just the money you’d acquire from a sale, though. Consider this: The current inventory of homes for sale is low and it may take longer than you think to find your next home. This means you may have to consider transitional housing or other creative solutions while you search for the perfect place to plant roots.
If you’re in the process of selling your home, and you’re concerned that you might close on your sale before finding your new home, you’re not without options. Together, we can try to negotiate for a later closing date when accepting a buyer’s offer. This will help you gain more time to find your next property.
Buying a home first
It’s also possible to buy a new home before you list your current home for sale.
- Upside: By buying a new home before you sell your current home, you can search on your own terms and put an offer on the home of your dreams — rather than being tied to a timeline.
- Downside: If you buy a new home before selling your current property, you’ll need to have enough cash on hand to cover the down payment for house #2, and you may end up paying two mortgages until your original home sells.
If you choose to buy first, be sure to prepare your finances and save as much money as possible in order to get approved for a second mortgage. This will also give you peace of mind as you commit to paying two mortgages for the short term (or possibly longer). And of course, you’ll want to hire a real estate agent who has strategies to help you sell quickly.
In some cases, homebuyers can use the equity of their existing home to fund their down payment for house #2, even if they haven’t closed on their first property sale yet. This kind of mortgage home equity loan* may be an option for those who are intending to sell, but it’s important to consult a home mortgage expert for tailored guidance.
Adding a contingency when buying
If you want to buy first, but avoid two mortgage payments, you can try to add a buyer’s home sale contingency in the purchase agreement of your new home. This contingency states that the transaction for the new house is dependent on the sale of your current property.
Consider that a seller may perceive a contingent offer as weaker than a non-contingent offer. And, in a housing market that favors sellers (like we have today), you may have a more difficult time getting a seller to accept a contingent deal.
Should I buy and sell a home at the same time?
This is a pretty common scenario, especially for homeowners who don’t have a “backup plan,” like the option to move in with family or friends for a few weeks or months.
At first, it may seem like the best-case scenario to both buy and sell at the same time. Here are a couple of considerations for you as you decide if this is the right path for you.
- Upside: You can time your moves to coincide. This will allow for a seamless transition from one house to the next. Packing up a van and relocating a few miles away is about as easy as a move can get.
- Downside: It can be a challenge to stage your for-sale home and keep it clean for showings, all while touring other homes, making offers and negotiating coinciding closings. If you think this would be too overwhelming, staggering your purchase and sale may be a better option.
So, what’s the best plan?
Unfortunately, there’s no one answer to this question. All homeowners are different, with unique finances, timelines and other logistical factors (like school and work schedules, family trips, short-term living options, etc.) to consider.
And, all homes are different, too! In an area without many homes for sale, sellers might accept an offer on a home in just a few days or even hours — while a seller with a less appealing property may wait months for just one offer.
All in all, the perfect option for one seller might not work for a different seller, even if they live on the same block. Together, we can weigh your personal and financial factors to determine if you should sell your home first, buy a home first or buy and sell at the same time.
Key points and next steps
Because the current housing market is full of demand, you’ll want to formulate a game plan in advance to organize the timing of your home sale, purchase, and a “Plan B” option. Reach out any time to get started on your journey of buying and selling.
*Not all buyers will qualify. Prosperity Home Mortgage, LLC does not offer financial advice. This information is provided for informational purposes only and does not constitute legal, tax, or financial advice.
Edina Realty Mortgage is an affiliate of Edina Realty. See Affiliated Business Arrangement Disclosure Statement
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