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One of the biggest questions I get asked whenever I go on a listing appointment is whether it is better to sell the house first before buying another one, or should we buy the house first and then sell our existing home!
This question is sort of like the chicken and egg question: which came first – the chicken or the egg!
Of course, there really is no right or wrong answer to this question. But there are some things that you need to consider when deciding which route you want to go. Here are the things you need to consider:
WHAT KIND OF MARKET ARE WE IN?
A seller’s market is one in which there are a lot of buyers and very few houses available for these buyers – kind of like our current market! Here, houses will sell very fast, but buyers are having a hard time getting offers accepted! On the other hand, if we are in a buyer’s market – kind of like what happened in the 2008 real estate downturn – then this means there are a lot of houses on the market, but not so many buyers to buy them and so houses will sit on the market longer and buyers will have a better chance of negotiating a great deal!
ASSESS YOUR PERSONAL NEEDS!
If you are relocating for a new job or you have kids starting school soon or pets would need to be boarded or any other major life change – all these circumstances could affect your timeline for selling and buying!
KNOW WHAT IS HAPPENING IN YOUR AREA AND NEIGHBORHOOD!
Even in the Richmond area, there are pockets where houses are not flying off the market with multiple offers and prices are not getting bid up, and there are even homes that are selling for less than asking price and sellers who are agreeing to pay a buyers closing costs. So even within the Richmond real estate market, you need to know what is happening in your area. Talk to your Realtor to find out what is happening – how long homes are sitting, how houses that sold quickly compared to your house, did the sellers pay closing costs, why did these houses sell in the time frame that they did!
THERE MAY BE SOME GOOD FINANCING OPTIONS FOR YOU!
Today there are lots of options available to help you with your decision! For instance, if you have a 5% down payment and you are qualified, you could possibly talk to your lender about doing a recast on your loan! Here is a great article at Bankrate.com to explain what a recast mortgage is! You may also want to talk to the lender about Home Equity Lines of Credit (HELOC) or Bridge Loans. You may even want to see if you can qualify to carry 2 mortgages (the one on the house you are buying and the one on the home you currently own!).
HAVE A BACKUP PLAN!
Whatever you do decide to do, you want to make sure you have a backup plan in place! If you plan to sell your house first, it may take some time to find another and get an offer accepted. Are you prepared to rent or to live with relatives or friends for a period of time? If you are planning to buy a house first, are you comfortable carrying two mortgages and are you prepared to have your house ready to go on the market asap? These are all things to think about and talk to your Realtor about before making a final decision!
KNOW YOUR TOLERANCE FOR RISK AND YOUR COMFORT LEVEL!
Even if you are qualified to carry two mortgages, you may not be comfortable doing so! Even if you love your parents, you may not want to live with them! Even if you think your home will sell quickly, there is always that off chance that it won’t sell as fast or for as much money as you thought! These are all things you need to consider first!
So what are the pros and cons of each decision?
BUYING A HOME FIRST – PROS!
- If you have the ability to do so, and you find your dream home before your current home is sold, you may regret not buying that dream home now!
- You can take your time to find the right home!
- There are some financing options available to you, such as a recast loan, that may work great for you! This could allow you to make a strong offer that is not contingent on the sale of your home!
BUYING A HOME FIRST – CONS!
- You may have to juggle 2 mortgages (or even 3 if you do a home equity line of credit)
- You may put pressure on yourself to sell your current home quickly to pay off the mortgages on your current home!
- Bridge loans and Home Equity Lines of Credit can be expensive!
SELLING YOUR HOME FIRST – PROS!
- Puts you in a stronger buying position – you’ve sold your home and the cash is in the bank so you will look more attractive to lenders and sellers!
- There is less pressure to make a quick sale!
- You know how much money you have from the sale of your house!
SELLING YOUR HOME FIRST – CONS!
- You may have to rent for a period of time, or live with family or friends, as well as putting furniture into storage!
- Any rental payments you now make could have contributed to paying off the new mortgage!
- While you are renting, home prices could continue to go up!
- It may be stressful if you have to live with relatives!
As you can see, there are pros and cons to both decisions. This is something that you and your Realtor should discuss when deciding if now is the time to sell your home and buy a new home! Have questions? Want to talk? Feel free to reach out – I am happy to answer any questions you may have – no obligation, no pressure!