Should You Sell or Buy First?
This is your dilemma:
Should you wait for the right home to come on the market before putting your current home up for sale or should you sell first and then go out and find what you want?
While there is no simple answer to this question, you will probably come to a definite decision based on your personal comfort levels with regard to the following...
- You know exactly how much money you have from the sale of your first home and can comfortably choose your next home's price range and negotiate accordingly.
- With cash in hand you can immediately make firm offers on any property that meets your needs. If a property pops up that is perfect or extremely well priced you can be the first in the door with an offer.
- You have more negotiating power. When Sellers turn down or counter an offer that is conditional upon the sale of a home, they usually believe that the Buyer will come back with a more serious offer if and when the Buyers' home has finally sold. Sellers give much more consideration to unconditional offers since they usually realize the Buyer does have other options and may move on and pursue a different property if their final offer is rejected.
- If more than one property interests you, you can shop around, negotiate, and finally settle on the best deal.
- If the right home is not currently on the market when you finally sell, and nothing comes up before your closing date, you may have to find alternative accommodation until something appropriate comes along.
Questions you should ask yourself:
- Do you have reasonable options available if your closing dates do not line up and you cannot move into your new home the same day you move out of your current home?
- How would you and your family react to the stress of having to rent for an unknown period of time?
- If you are only interested in moving if a very specific property comes up, buying first ensures you do not miss out on the perfect opportunity.
- If a unique or underpriced property comes on the market and you do not think it will last long, snapping up the deal ensures someone else does not buy it out from under you.
- If your current home does not sell quickly enough you may end up having to finance both homes and carry the extra debt until you do sell.
- You do not know what the final selling price of your current home will be. If your budget is tight, this could affect your financial decisions. While you can get appraisals and market evaluations of your current home's value, nothing is for sure until you actually get an offer.
Questions you should ask yourself:
- How would you react to the stress of owning two homes at once? Would you have the financial reserves to do this?
- How would you feel if you were eventually forced to sell your current home at a "fire sale" price?
A third option involves making your offer to purchase conditional upon your being able to sell your current home within a specified time period. Conditional offers usually include a clause that allows the Seller to continue to market his or her property while you try to sell your home. If the Seller receives another bona fide offer, they can accept it and ask you either to remove your condition and firm up or to step aside. While conditional offers do not provide all of the advantages of the first two options, they do offer a reasonable compromise for those uncomfortable with the drawbacks associated with either selling or buying first.
- You do not have to sell your current home until you have found and negotiated an acceptable price on your next home.
- You have less negotiating power. Sellers sometimes turn down or counter an offer that is conditional upon the sale of a home. There is a general impression that Sellers give less consideration to conditional offers than they do to firm ones. Some Sellers feel that the Buyer will come back with a more serious offer if and when their current home has finally sold. You may end up having to pay a bit more for the house in order to get your conditional offer accepted and be first in line.
- Another purchaser may make an offer and bump your offer before you have sold your current home, putting you back at square one.
- You cannot withdraw your conditional offer until the time set out in the condition has passed. This could be frustrating if a better deal comes along and you wish to pursue it.