It’s time for you to move. Maybe it’s because your family is growing and you need a larger home. Or perhaps your nest has recently emptied and you want to downsize.  Whatever the reason, as a home owner, you not only need to find a new home, you also need to sell your current home.  This brings us to the question…which should you do first?  Buy, then sell? Sell, then buy? Or do both at the same time?  There is no one right answer for everyone, but certainly there is one that is right for you. Here are the pros and cons of each of these options:

BUYING FIRST - PROS

  • One perk of buying a new home before you sell your current one, is that it allows you the time to find the ideal home without having to rush to a decision. There is no pressure to get out of your current home by a certain date, forcing you to maybe choose a house that isn’t quite right.
  • If you are a planner by nature, then knowing where you’re going to be living once you sell your home is definitely a positive aspect of buying first.  It will give you peace of mind to know that you can move directly to your new house once you have sold your current one.
  • If you buy first, you can take your time moving.  You will also have the time to do any work on your current property that is needed, such as home improvements and/or updates, before you put it on the market.

BUYING FIRST - CONS

  • Ideally, you would be able to sell your current home within a month of purchasing your new one so that you don’t have to pay two mortgages.  But there is no guarantee that will happen.  Your house might sit on the market for a while, and if it does, you need to be prepared to make two mortgages each month until it sells.  If this is not something you are able to do, you probably shouldn’t buy before selling.
  • If you buy before selling your income will need to be able to support both mortgages.  This will increase your debt-to-income ratio ( DTI )meaning that if you’re already struggling to qualify for a new mortgage, it’s going to be even less likely you will qualify if you have two mortgages.  You may want to sell first to lower your DTI so you will qualify for your new mortgage.

SELLING FIRST - PROS

  • Depending on the state of the current real estate market, there may be a lot of competition for homes.  In this case, you will find that selling first and having cash on hand will be an advantage when competing with other buyers.  You will also be in a better negotiating position if you don’t need a contingency when you buy. Home Sale Contingencies for Buyers and Sellers
  • When you sell your current home first, you will have a clear picture of how much you can afford for your new home.  It will also provide you with cash to put toward your down payment.  If you can put a full 20% down, depending on your loan program, you can avoid paying mortgage insurance each month. This will save you money over the life of your loan.
  • Selling first will eliminate some expenses.  If you buy a new home before you sell, you will not only be making two mortgage payments until your current property sells, but you will also be paying for utilities in both homes.  These expenses can add up quick!

SELLING FIRST - CONS

  • When you sell your house before you have found a new one, you may have to find temporary housing…which can be a real hassle. Trying to find a place to live on a short-term lease is challenging and becomes even more complicated if you have pets or you are looking for specific school district.  It also means you will have to move…twice. Moving once is stressful enough. Moving twice in a short period of time is exhausting. And when you do find your new home, you may have to juggle both a rent and mortgage payment for a month or more depending on your lease.
  • If you’ve sold your current home, but haven’t found your new one, you may feel panicked about finding a home quickly.  This feeling might lead you to rush your search and to perhaps settle for a home that isn’t right for you.  Buying a home is likely the largest financial investment you will ever make, not to mention the logistical and emotional implications, so it is a decision that you definitely don’t want to rush.

Believe it or not, it is possible to buy and sell simultaneously.  For example, you can make a contingent offer, meaning that your offer is dependent on your current home selling.  A contingent offer may not be as appealing to sellers in a competitive market, but it eliminates the risk of ending up with two mortgages. Another option is to use a HELOC: Home Equity Line of Credit to cover the cost of purchasing a new home while still paying mortgage on current home.  There is also the possibility, depending on your lender, of getting a Bridge Loan to help cover expenses in the time between buying and selling.

There are many factors involved when deciding whether to buy or sell first. Let an experienced Realtor like Sandra Nickel assist you in navigating the home buying/selling process.

If you are in the market to sell or buy a home, let Sandra Nickel and her Hat Team of professionals assist you with all your real estate needs!  Call them today at 334-834-1500!