Do I Buy or Sell My Home First?
The main 4 questions to answer are:
1. Can you afford to buy the new house without selling the existing house?
2. How challenging will it be to sell the existing house?
3. How difficult will it be to find the house you would like to buy?
4. How inconvenient will it be to move into temporary housing?
Can you afford to buy the new house without selling the existing house?
If the answer is yes, then it’s probably best to buy first and have a plan in place for selling your existing home. You just need to factor in how long you are realistically going to need to pay both mortgages.
People often ask if you’re likely to get more for your house if it’s empty or occupied. The answer is that it doesn’t make any difference, so don’t go out of your way to sell your house with you in it. See Is it better to market a house furnished or vacant?
It’s a lot easier to move into your new home, and then do whatever repairs and painting you need to do to the old home when it’s empty. You also don’t need to be inconvenienced by showings, or need to worry about keeping the home in showing condition all the time.
How challenging will it be to sell the existing house?
This depends on how long houses generally take to sell in your neighborhood, and how likely you will be to overprice your home. Examples of houses that typically take longer to sell are those out in a less trafficked, country area, houses with something unusual about them, or houses that are substantially different from other homes in the neighborhood.
The biggest factor in how long it takes a home to sell is the seller’s pricing strategy. Some sellers are worried about “leaving money on the table”, and want to initially set their price too high. They reason that they can always come down, or somebody can always just make an offer. This is a mistake. You will just waste time and not end up with a better sales price in the end. A better strategy that is more likely to get the most for your home is to price it right to begin with. You are more likely to get a full-price offer in the first 5 days of a listing than after it’s been sitting for a month and you had to make a price reduction.
If you think selling your existing home is going to take a long time, and you can’t afford to make 2 house payments for the duration, then you need to sell first.
How difficult will it be to find the house you would like to buy?
If you are very picky and will probably take a long time to find a house you like, then that tilts the scale to buying first.
The problem is if you can’t afford to buy without selling your existing house first. The conventional wisdom is, “no problem, we’ll just make the purchase contract contingent upon selling our other house first”. In practical terms, the sellers of desirable homes, especially the homes you are likely to want, will decline your offer and sell it to someone who can buy now. Contingency offers are more likely to get accepted by sellers of overpriced homes that have been sitting on the market for a while – the kind of houses you are probably not going to like.
We have often helped buyers strategize the purchase of a home with a simultaneous sale of their current home without a contingency. We can accomplish this by stretching the close date of the purchase, shorten the time it takes to sell the current house, and have some outs in place to prevent losses in case things don’t play out as planned. You can close on both houses the same day (ideally with the same title company), and have the movers move you directly from your old home into the new one. Call us to see if this is a viable option for you.
How inconvenient will it be to move into temporary housing?
If all else fails, then you may need to sell your existing house first and move into a rental. If you are going to take a long time to sell your existing house, and you are picky about what you’re buying, and you can’t afford to buy without selling, then you have no other realistic choice. Making contingency offers until you get one accepted is not a viable strategy.