How to Sell and Buy your home the smart way

Unless you are a first-time buyer, you have probably asked yourself ‘What should I do first – buy or sell?'. I’ve helped a number of clients in this situation and my answer usually starts with ‘it depends’. It depends on a number of factors and this post will explore the pros and cons with each. Part 2 of this article discusses various ways to protect yourself so you don’t find yourself homeless.

Buying and Selling simultaneously can feel like a high wire balancing act. You are hesitant to buy or place a contract on a property, without knowing when your current place might sell and for what price. Yet, you don't want to sell your current place until you know where you want to move to or what you could likely afford. Where to start?

Whether or not you buy first or sell first, you should do a little bit of both in tandem, meaning you should have some sense of where you want to move to and home prices in that area. You should also have some sense of what your current home is worth and how long it might take to sell. For a more accurate estimate of your home's value, contact us for a free Comparative Market Analysis (CMA). You should also be aware of the general market conditions – is it a buyer’s market, a seller’s market or a balanced market.

Financing

One of the first steps is to assess your financial situation. There are numerous expenses associated with selling a home, buying a home and moving. Do you need the equity out of your current place for a down payment on the new place? Do you have money set aside for closing costs when you buy? Talking to a lender might make the buy/sell decision very easy. You might need to sell your current place first to be able to qualify for a new mortgage.

Buy First

If you are fortunate enough to be able to carry two mortgages and have sufficient cash reserves for a down payment and closing costs, buying first might be the easy option for several reasons:

• Sellers are more likely to accept your offer if it is not contingent upon you selling your home first.
• You won’t have to worry about being homeless or moving into temporary housing.
• You have more flexibility in moving dates.
• When selling your home, it will be easier to show and you won’t have to worry about being interrupted every time a buyer wants to see it.

• Your home might take longer to sell than you think and you could be carrying two mortgages for some time.
• Your home might sell for less than anticipated.

Sell First

For many people, selling first is the only option. You might need the equity out of your home for a down payment or you might not qualify for the new mortgage because of excessive debt ratios. The pros with selling first include:

• You won’t have to worry about carrying two mortgages.
• You can write an offer on a new place without a sale of home contingency, which makes your offer more attractive.

Of course, there are also some obvious risks:

• You might not find your next home by the time you have to move out.
• Your financial situation might change making you ineligible for the new mortgage.
• Mortgage rates could rise and make your new home out of reach.
• The market can shift and the available inventory can change quickly.

In part 2 of this series, I’ll discuss how to protect yourself when you are buying and selling simultaneously.