When It’s Best to Sell Your Current Home Before Purchasing a New One
Buying a new house and selling your current house simultaneously can definitely be done, but things can get a little tricky in the process. There’s so much to do to get the house shiny and ready for house hunters. You also must make time to go house hunting yourself. Then you go into negotiations, escrow, and closing procedures. And, often (read: most of the time), things get delayed, and both transactions’ timelines don’t always align perfectly.
That’s why, in some scenarios, it’s smarter, easier, and less financially risky to sell your current home first before buying a new one. Below, find six times that you should sell before buying.
The market is competitive for buyer’s
A booming market where buyers are snapping up hot properties left and right means you’ll need to submit a competitive offer on the house you want to buy. If you’re still waiting for your current home to sell and your money is wrapped up in the house, you may need to add a contingency clause to the offer, meaning your offer is contingent on your current home selling first before closing the sale. As you can imagine, this isn’t as enticing for sellers, and they may not even consider your offer given all the great offers they’re getting. Selling your home first puts you at an advantage in a competitive market.
You don’t want to pay for two mortgages
When you try to buy and sell simultaneously, and your current home takes longer to sell than you anticipated, you may end up paying for two mortgages at once—one for your old house and one for your new house. This, of course, is not ideal and would require that you have some cash stashed away to cover both mortgages. However, if you focus on selling your current home first, you avoid this potential problem altogether.
The seller’s market is slow
If the seller’s market in your area is relatively slow, it can take longer than you’d like to sell your house. If you haven’t yet purchased a new house, this won’t be a big deal because you’re not in a rush and can wait until you negotiate an offer that you’re happy with. If, on the other hand, you’ve already purchased your new home and your old home is taking forever to sell, you’ll end up having to cover two mortgages at once and have that added pressure of getting the old house off your hands. This may lead you to accept a less than desirable offer.
You want to avoid feeling stressed and overwhelmed
Like we mentioned previously, buying and selling at the same time is a lot of work. Many things go into both transactions. From getting your house ready for viewings to going house hunting to closing the sales and packing up and moving, it can take up a lot of time and energy. If you don’t want to put yourself and your family through all that, selling your home first before buying a new one can make the experience smoother and more enjoyable because you’re only focusing on one thing at a time.
You want to take your time looking for your next house
Choosing the right home to purchase is a big decision and not one you should make under pressure. Selling your house first allows you to take your time looking for your new house without that added pressure. Some people even decide to rent a place in the area they plan to buy to get a feel for whether it’ll be a good fit before committing. Finding the house for you can take time and patience, but you’ll know in your heart when you’ve found the one.
You don’t qualify for two mortgages
If you are up for the challenge of selling and buying at the same time, you have to either have enough cash for the new house purchase or qualify for a second mortgage. When you apply for a second mortgage, lenders don’t consider that you plan to sell your current home shortly after that. In other words, they’ll assume you’ll be keeping both properties, which can make it challenging to fit loan requirement criteria to qualify. If you don’t think you’ll be eligible for the second mortgage, selling your house first is the better route and would make the financial side of things much more straightforward because your money will be accessible, and you’ll know your budget for your new house.
Keep in mind
All that said, the decision to sell first, buy first, or do it at the same time is ultimately up to you. Our goal is to arm you with all the facts to make the best possible decision for you and your family. Here are a few more things to keep in mind if you do decide to sell first:
- You’ll need temporary housing. After you sell your current home, you’ll need a temporary place to live while you house hunt, whether that’s a rental or with friends and family. This means you’ll end up having to move twice and pay for moving costs twice as well.
- You may need storage. If you’re temporarily moving in with friends and family or into a smaller rental, you may also need to put some of your things in storage. Factor in these costs as well.
- Consider adding a lease-back contingency. Another option at your disposal is adding a lease-back contingency which allows you to lease your current home back from the buyers for 30 to 90 days. This gives you some time to search for your new home without the hassle of moving twice.