Buy First Or Sell First - Which Is Best?

Posted by Ed DePrato on Thursday, August 7th, 2014 at 3:56pm.

Should you buy a home first and then sell your house, or sell your home first and then buy a house? This is the classic real estate catch-22 that many people deal with when attempting to move their life and family, along with their equity from one home to another. There are some solutions that you should know about.

Either way is risky because if you buy before selling your existing home you run the risk of owning two homes for a while and double your monthly housing expenses for items like mortgage payments, property taxes, utilities, and maintenance/condo fees. This can wear on a persons’ psyche and your resources. This process will sometimes cause you to become more motivated to sell which may result in aggressive (perhaps ill-advised) price reductions, or having to accept a lower offer that you might otherwise have rejected. But if you sell first, you run the risk of ending up not having a home and being forced to rent, living with family and no less than moving twice. Not to mention that you may settle on buying a home you don’t really love, or be forced into paying more than necessary because of your motivation.

Your comfort with making your selection for how you proceed should be your priority, but to help with making this decision here are two options and items you need to know about the various options:

  1. Buy first and make your offer Subject to the Sale of the Buyers Home. This protects you from owning two homes because if you don’t sell your existing home you’re not obligated to complete the purchase of your new home. However, you should know that when you use this strategy the seller you’re buying from will (most often) reserve the right to continue showing their property to other prospective buyers, along with the right to accept any other offers with the undertaking to give you time (24 or 48 hours) to complete your purchase as agreed. If you can’t or won’t then the seller gets to deal with the other offer and you’ll lose your time and effort invested in the deal. Your deposit will get returned to you but you’re back at square one starting the search from zero again. Another drawback to doing this would be that the seller will most likely only accept this structure if you’re paying very close to the asking price – so you pay more (most often).

  2. Buy first with a longer possession date. If you plan to sell your home and want to move your equity then do it. If you commit (on a purchase contract) to close on the purchase in (say) 6 months, then you’re giving yourself no less than 5 months to sell your existing home. By making your deal firm (rather than subject to the sale of a home) your seller will see this as a stronger offer. Sure, the possession date is long, but the point is that the deal is firm – that’s what most sellers want. So here, you can expect a better purchase price. But what if your home doesn’t sell? Well, you’ll need to be realistic here. Every home sells at the right price. Eventually, every seller needs to face the reality of what buyers are willing to pay for their home. Know the facts before doing anything! By giving yourself that amount of time you have some options. If you’re lucky and sell quickly, changing the possession date on your purchase is as simple as asking the seller to change the possession date.

Moving equity from one home to another is often the cause of most real estate problems and not even most agents understand the mechanics to properly advise someone about the options. Choose your agent carefully. As I've said before, interview several agents before you commit and make sure they fully understand your goals and intentions.




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