Weigh these 9 pros and cons before you decide to sell before buying your next home.
You’re ready to move on to the next phase of life, but you haven’t yet found a new place to call home. Should you sell your current home before you buy a new one?
To help you make a more informed decision, let’s look at the pros and cons of jumping into a sale versus waiting until you’re ready to buy your new pad.
3 reasons to sell before you buy
1. It gives you more cash to bring to the table
Few of us can afford to buy a new home before we’ve sold our current one.
Not only will you be in a better negotiating position if you have cash on hand from your own sale, but you’ll also have a better idea how much you can spend on a new home.
If you don’t sell first, you might need to submit an offer that’s “contingent” upon the sale of your current home — and that offer is weaker than an offer without a home sale contingency, all else being equal.
2. It saves you from being stuck with two mortgages
You have no idea how long your home may take to sell. In addition to the time it takes to find an interested buyer, there are plenty of steps between the offer and the closing that can slow things down.
Imagine, for example, that the buyer’s home inspection reveals an issue with the property or that your house doesn’t appraise for the agreed-upon price.
If your current home winds up taking a while to sell, you could be in the unfortunate position of paying two mortgage payments simultaneously — or trying to find a renter, which is the last thing you want to do if your ultimate goal is to sell.
3. You have more freedom to sell on your terms
When you sell before you buy, you carry more bargaining power (as a seller). You’re in no rush to unload your property quickly, because you’re not feeling the stress that results from carrying two mortgage payments. You’ll be comfortable weighing several offers and make counteroffers without pressure to accept a low-ball price simply to beat the clock.
6 reasons to buy before you sell
1. You enjoy knowing what’s ahead of you
If you’re the type of person who feels nervous leaping into the unknown, you may find you’re better able to let go of your current home when you know you’ve got your next place already lined up.
2. You have time to hold out for what you want
You won’t feel rushed into settling for a home that’s less than perfect just so you have somewhere to live (or because your friends are getting sick of your crashing in their guest room).
You’ll be able to wait for your housing preference, whether it’s the perfect neighborhood, perfect layout, or the perfect price (or all three).
3. You could still bring cash to the table
You may qualify for a bridge loan if your credit is good and you have enough equity in your current home.
These loans allow transitioning homeowners who haven’t yet sold their current home to access the money they need for a down payment on a new home.
4. You save on extra moving costs and hassle
If you sell your home before you buy the next one, you may wind up moving twice — first to temporary housing and then to your purchased home. Conversely, if you buy first, you’ll need to move only once.
Moving twice doubles the hassle and cost, from truck rentals to movers’ fees to the stress of boxing all your belongings, unpacking some of them in your temporary residence, and then repeating the process.
If your temporary residence is small, like a hotel room or a guest room in a friend’s house, you’ll also face storage fees for all your furnishings in limbo.
Besides, moving is distracting and time consuming; the more you can minimize it, the better.
5. You have a safety net
You can always make an offer that’s contingent on the sale of your current home.
This safety net allows you to put your next house under contract while still giving yourself extra time to find a buyer for your current home. In theory, that’s the best of both worlds.
That said, a home sale contingency is undesirable from the seller’s perspective, which could compel him to favor other offers. If you’re in a strong buyer’s market, though, a seller might be more amenable to contingencies.
6. Your next home is too good to pass up
Hooray! You’ve found your dream home, and the seller is extremely motivated (or it’s a hot seller’s market, and you’re competing with many other buyers).
If you love the home so much that you know you’ll regret letting this opportunity pass you by, then it could be worth taking a leap.
To sell or to buy first?
Deciding whether to sell first or buy first is a tricky dilemma, one that can feel like a chicken-or-the-egg scenario with no right or wrong answer.
Ultimately, your ideal answer comes down to your risk tolerance, priorities, budget, timeline, and which of these arguments speaks to you the strongest.