Should You Sell Before Buying a New Home?

In many cases it makes the most sense to sell your home before you buy a new one. If you try to sell your home after buying a new one, you will almost certainly feel rushed and might end up selling for less than market value.

On the other hand, if you manage to sell your home before needing to close on the purchase of a new one, you can easily rent month to month while you look for your new home.

The Inconvenience Factor

Though it is understandable to want to buy a new home right after you sell yours for many reasons, with the most obvious being:

• The inconvenience of moving twice
• Having to pay for two moves
• Paying rent that might be more expensive than your previous mortgage payment

Benefits of Selling First

However, selling with the intent to buy makes a lot of sense because:

• You'll have a much better idea of your financial standing
• You can put a larger down payment on the new home
• You may qualify for a better interest rate
• You will be in a stronger negotiating position when buying
• You'll have more time to find the home of your dreams
• Your offer won't have a home sale contingency

Understanding Home Sale Contingencies

What's a "home sale contingency" you ask? A home sale contingency is a common clause written into an offer on a new home which states that the offer is based on the successful sale of the buyer's current home. In other words, you are asking the seller of your potential new home to enter into a contract that may not actually happen if your current home doesn't sell.

This is a reasonable practice in many ways, but it is also reasonable for the seller of the home you want to purchase to be concerned that your home may not sell for a variety of reasons, including:

• Your current home could be in a weak market
• Your home might be in a poor location
• You might have it overpriced

Potential Risks of Contingent Offers

Sellers will often continue to market their home even after accepting a contingent offer. In most cases, the contingent contract gives you, as the buyer, a fixed amount of time to sell your home. Often there is a "kick-out clause" allowing the seller to cancel the contract if they receive another offer without a contingency.

Finding the Right Strategy

Selling before buying can certainly come with more inconvenience, but at the same time, it offers more flexibility and bargaining power when you're ready to buy your new home.

Each case is different, so if you're interested in buying or selling, please give us a call and we'll help you figure out the right strategy!