Should You Buy First Or Sell?
If you're already a homeowner and are now looking to move up or downsize, you are probably thinking about how to handle the transition from home no. 1 to home no. 2. Should you first buy a new one or sell the old one? How to make it work? Well, even if it can get confusing in both scenarios, realtors advise selling first, especially in the market we have today. Selling first carries fewer risks and makes it easier financially.
If you decide to sell first…
Selling your old home first is the more logical move as you’ll know exactly how much money you’ll have at hand once the home is sold. Looking for a new home will be much easier with a large amount in your account and knowing the price range you can afford. The only stress factor you have to deal with is time pressure if you are keen on finding a new home before closing on your old one. To help your case, you can simply take 90-120 days to close on the old home and get some extra time to find a new one. The worst thing that can happen is that you don’t find it in the given timeframe and have to move in with your family or go into a short-term rental until you get your own place. Whatever it may be, never settle for a new home that doesn’t match your needs and wants just because you have to be out of your old home by moving date.
If you decide to buy first…
Buying a new home first is riskier, especially because the market has gone through significant changes. Last year, we saw the government make several changes that affected the housing market, and often times, people that bought a home first actually lost $50-$120k because the market shifted from a seller’s to a buyer’s in the blink of an eye. People who decide to buy first often do so with the idea of selling the old home before closing on the new one, but in real life, it doesn’t always work out like that. You could quickly find yourself paying off mortgages on both homes at the same time and still having to cover the down payment on the new home. In such a situation, people usually go with a home-equity line of credit to cover the down payment, but do you have the kind of income to qualify for paying off all three debts (the old mortgage, the credit line and new mortgage)? The financial burden can easily become too much to handle and force you to sell the old home for a bargain price just to reduce your costs.
Even if it seems a bit complicated in both case scenarios, the sell-first-then-buy strategy sounds more promising at the moment, simply because the market is uncertain and we don’t know what will happen. On the other hand, buying first requires a deep pocket to withstand the financial pressure even if the market conditions should go in your favor.