You own a house now, and you are planning to sell your existing one and buy a new one in another area or move from condo to a house. But you are not sure if selling your house first is a right move or look to buy first!
Unfortunately, there is no right answer to this! You need to evaluate your needs and figure which solution is the best for you and your situation. Here’s a look at each approach that might help you decide.
When to buy before sell:
It is a seller's market: Knowing that your existing house is in a hot seller’s market, meaning that your house will be on a market in a matter of hours or days, and you will not have any trouble finding someone interested to buy your place. Gives you some sort of confidence to look for your desired house.
Renovation: Buying your dream home first can give you some time to renovate your new place while you are living in a comfort of your old house.
Found a great deal: Sometimes a house will come on the market at a price that is too good to pass up or a fear of the right house might not be available if you wait to sell your home first.
Downside: if you buy a property first but are not able to sell the old one, you are on the hook of owning two properties including mortgage, property taxes, utilities etc. For some people this can be highly stressful.
Options and Strategies:
Bridge Finance: this strategy can help you to bridge the gap between the time you sell your existing house and buy the new one. It allows you to use the equity in your current home to make the down payment on your next home, while you wait for your existing home to sell. When you do sell, you can use the proceeds to pay off the bridge loan and any accrued interest.
However, Bank only bridge finance a property that there is a firm purchase and sales agreement available. It also can be an expensive proposition, especially if the date of selling your house is few weeks after the date of your purchase.
Include contingency in your offer to purchase: Best advice is to protect yourself by making the offer to buy with a condition providing for “Selling Your Existing Home First”. If you decide to make such an offer, consider getting legal advice and to ensure it is phrased properly.
When to sell before buy:
Selling your home first is a safer and more conservative approach and if you are tight financially then this is a good strategy to consider.
This option gives you a chance to know how much money you will expect from the proceed of your old house. It helps you to set a price range for the new home. If you have already sold your house prior buying a new property, you don’t have to make your offer conditional on “Selling Your Existing Home First”. You can also wait for the best-selling price because you are not in hurry to close a new home.
Here are some scenarios that you might want to consider:
- Alternative arrangements: renting somewhere temporary to live or send your belongings to a storage.
- Bring your price down: If you don’t get an offer on your house at the price you initially wanted, you might have to lower your price
- Compromise on you purchase: You have to settle for something that isn’t quite what you initially hoped for.