The other day I was talking to someone and they told me that they were thinking of moving.  Of course, they own a home and the first thing they wanted to know was – should they sell their home before even beginning the search for a new home!  This is kind of like asking which comes first – the chicken or the egg; the horse or the cart!  A few years ago, my advice would have (perhaps) been to begin looking for a home, get qualified for a bridge loan (remember those things that are no longer available!) and find a home!  This was because, back in the “good old days”, houses were selling within hours if not days, and so there was little chance that a person’s house would not sell rather quickly, and there was an even smaller chance that the house they would want to purchase would even be available by the time their house was sold!  But, oh how times have changed in only a few short years!  So here was my advice to these people – sell your home first and plan to potentially go into a rental for a period of time before beginning your search for a new home!  Why?

• First, it may take some time for your home to actually sell!  This market is not a market that is particularly kind to sellers.  You are competing against not only other resales, but new construction homes where the builder may be offering steep discounts to get their inventory sold as well as foreclosures & short sale properties.  Until you actually get a contract from a buyer and get the home closed, you may not be sure of exactly how much you will walk away with after paying off the costs of the sale!

• Second, you may find a home that you fall in love with and then find out that you can’t buy it!  Perhaps you write up an offer that is contingent upon your home selling – but there remains the possibility that the seller gets another offer that is not contingent upon the sale of a home!  Or your home never sells and therefore, the home sale contingency cannot be removed! 

• Third, if you are asking the seller to accept your contract that is contingent then you may or may not be in a position to negotiate a better deal than you could if you were not making your contract contingent upon the sale of your current home!

• Fourth, the seller may not want to accept your offer that has such a big contingency in there!  Then you have to hope that no one else comes in and scoops up the house of your dreams before you can get your home sold!

So what are some of the alternatives? 

• When you get an offer on your home, see if the buyer of your home will let you rent back for a period of time after closing.

• If your contract has a long closing time period (such as 60 days), begin searching as soon as you are comfortable that your contract will go to closing – you have a strong lender letter, inspections have been agreed to and completed, etc.  In this way, you can make an offer on your dream home contingent upon your current home closing.  Ask your buyer to allow you a 1 or 2 day possession after closing to complete the closing on your new home and to move out.

• Make any offer you get contingent upon you having a period of time to find a home of your choice.  This should be limited to a short time frame (e.g.-2 weeks or so) so as not to scare off any potential buyers.  This will allow you a short period of time to find another home, and if you do not find one during this time period, you can terminate your contract or try to negotiate an extension with your buyer.

• Move into a short term rental.  Although this may be a little inconvenient, it may give you the time you need to find the right home and to negotiate with the seller from a position of strength, rather than with a large contingency in your contract.  This makes you a much more attractive to the seller of the home you would like to purchase and make give you more leverage than you would otherwise have.

Whatever you do decide to do, when you are talking to your Realtor about selling your home and helping you move to another home, this is something that should always be discussed.  There are pros and cons about each option you have available to you – you need to determine how high your risk tolerance is and if you are willing to move into a rental home after selling your current home! 

As we come closer to our spring selling market, this will be a question that many of us will be asked.  Knowing your options will help you make decisions that are right for you and your family with no surprises!  Feel free to let me know if you have any questions!