Buy Or Sell First?

  • Are you a homeowner considering looking for a new home? Then chances are you’re wondering about what your strategy should be: Do you wait to find the perfect new home before you put your current home on the market? Or do you sell first and then look around? To buy or sell first?

    You actually have a few options. Use the following as a guide to explore what might be the best move for you. If you sell first… There are some benefits to selling your current home before searching for your next property:

    1. Once you have sold your home, you’ll know precisely how much money you have to work with. With a concrete price range, you can narrow down the pool of properties to choose from. You’ll have a wider opportunity to look around, negotiate, and find the best deal and fit for you and your family. It also allows you to immediately make firm offers on properties that you are serious about purchasing.
    2. You can be first in line with an unconditional offer you know you can afford. This grants negotiating leverage because Sellers definitely take unconditional offers more seriously than offers laden with conditions.

    The flip side of this scenario, however, is that if you don’t find the right property before the closing date of the home you’ve already sold, you may have to consider temporary housing until you find what you’re looking for. In conclusion: before you opt to sell first, plan. Determine whether you have alternate, temporary options in case you have to move from your current home 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? If you buy first…
    Buying a new property prior to selling 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.
    • you unexpectedly fall in love with a property and want to grab hold of it before it’s too late.
    • a property suddenly catches your attention due to its uniqueness or unbelievable price.
    • you feel you are very “picky” and are worried about having to settle for a home that isn’t quite right

    If buying first means you don’t miss out on the real estate opportunity of a lifetime, it may be the best move. However, be careful. Buying another property without being able to sell your current home can put you in the situation of having to finance both homes and shoulder 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 receive for the home after negotiations. Since your selling price will be an unknown, jumping into a purchase is a gamble, particularly if your budget is tight. To be safe, make sure you’re familiar with all aspects of the financial reality this scenario creates before you purchase another home.

    1. The worst case scenario is you may be faced with owning two homes at once. What type of financial stress would this bring to your life and how would you deal with it?

    2. Also 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 to align the closing dates of your two properties. What effect would this have on your financial situation?

    Perhaps a Conditional Offer? An additional option to consider is making a conditional offer to purchase upon the sale of your current property within a specified period. A few things to keep in mind:

    1. Conditional offers usually include a clause that allows the Sellers to keep their property on the market and remain open to other offers while you try to sell your home.
    2. Sellers usually only accept “subject to sale” offers if there is no other interest in the property.
    3. 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.
    4. A conditional offer forms a middle ground -an area of compromise – for those who are afraid to sell or buy first, but doesn’t hold the advantages of the other two options.

    One of the drawbacks of the conditional offer is that Sellers tend to take them less seriously, leaving you with less negotiating power. In fact, 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 when their home has sold. In the end, you may end up having to increase your offer in order to have your conditional offer accepted and keep your foot in the door. Even if your conditional offer is accepted, there is no guarantee another Buyer won’t step in and overthrow your offer before you’ve sold your current home. Also consider the fact that you cannot withdraw your conditional offer until the end of the period specified in the contract. This means that if a better deal comes along, you will have to wait to jump on it. (Photo: flickr.com/desiitaly)