If you are a current homeowner that wants to purchase a new home, you’re most likely asking yourself a question common to folks in your situation: Should I sell before I buy?
The answer to that question depends on several factors.
Just the thought of having two mortgage payments—even for a short period of time—can cause massive anxiety for some people. Even if your lender has assured you of a simultaneous close on the two homes, uncertainty may linger.
Then, there is the pressure to accept an unattractive offer just to ensure that the home sells in time. If you wait to buy, you’ll have the luxury of being able to negotiate offers as they come in.
If you crave certainty, you should probably wait until the current home sells to take on the purchase process.
There are, however, those who deal with uncertainty better than others. If that describes you, then starting the purchase process before you sell your current home probably won’t faze you.
Regardless of your personality, if you just don’t have the money to support two mortgage payments at the same time, then you have no choice but to sell your home before you purchase another.
Further, if you need the proceeds from the sale of your current home to use to buy a new home, you’ll need to wait until after you sell, or attempt a simultaneous close. (We explain that process below.)
A seller’s market is the ideal situation when you’re selling your current home, but it can be difficult if you hope to purchase at the same time. In a seller’s market—where there are few homes available and lots of buyers competing for them—sellers are in the driver’s seat. With multiple offers coming in, homeowners are not likely to accept an offer that is contingent upon another home selling.
On the flip side, in a hot seller’s market, homes that are in good condition and are located in decent areas will sell quickly. If your house is among them, you take on little risk if you wish to purchase a new home before selling your current one.
Ascertain if the current market caters to sellers or buyers before making the decision of whether to buy before your house sells. Your real estate agent is your best source for this information.
Achieving the Simultaneous Close
Selling one home while purchasing another can be a bit of a balancing act. If you try to time the closings to occur during the same period, you run the risk of ending up with two house payments at once.
If you allow too much time between closings, on the other hand, you may find yourself renting a temporary home and, thus, moving twice.
The ideal situation is to plan for a simultaneous closing, where both transactions occur on the same day. However, this process comes with risks, too. If anything should go wrong on the first transaction you could end up not being able to close on the second.
For the simultaneous closing process to go smoothly, it’s important to choose the right buyers for your current home. How much do you know about their finances? How firm is their offer? What do you know about their motivation to purchase? How badly do they want the home?
Since the process is a bit like a string of dominoes, and the buyer of your home is the lead domino, it’s crucial to choose a buyer you know will consummate the deal.
The key to success is hiring an experienced, professional real estate agent. Your agent can guide you through the process and steer the transaction to keep it on course.