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.
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.
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:
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:
Of course, there are also some obvious risks:
In part 2 of this series, I’ll discuss how to protect yourself when you are buying and selling simultaneously.