My friend Julie is in a perpetual house hunt. Rarely a week goes by without her calling about a home she’d like to check out. The problem? She can’t buy a new home without selling her existing one, she doesn’t have her home on the market, and does not plan to list it until she’s sure “there’s a perfect home out there for her to move into”.
Hence she has that chicken-and-egg dilemma that many people face when looking to buy and sell a home. Should she buy her new home first before selling her existing home? Or should she sell first and then start shopping for a new home? Or should she try to get everything to line up simultaneously?
In honor of Julie, I thought I’d talk about the joys and perils of buying and selling a home at the same time. Here are the pros and cons of each approach.
Buying a new home first and then selling your existing one
|You can search for a new home without feeling any time pressure.||You run the risk of having to carry two mortgages.|
|You’ll minimize upheavals to your household by only moving once.||You don’t know for sure how much equity you’ll get from your existing home.|
|You don’t need to worry about finding interim housing.||Buying first can be tricky if you need the cash from your existing home for your deposit, down payment, and closing costs on the new home.|
|You won’t have to deal with the hassles of home showings at your existing home since you’ll have already moved out.||If your existing home is vacant, your insurance premiums will likely go up substantially, and you’ll be paying to heat, insure, and maintain the home while it’s empty.|
To minimize the amount of time you’re carrying two mortgages:
* Take care of necessary repairs before putting your home on the market.
* Set a realistic price. Ask your listing agent to share what comparable homes have sold for.
* You may want to consider getting a home inspection first so you can fix any repairs ahead of time.
* Be sure you have a realtor who will market your home aggressively. Find out exactly what their marketing plan entails and how they can help you secure a buyer swiftly.
Also, here are few tips from our friendly mortgage planner Rick Scherer of MSA Mortgage about financing the purchase of your new home before selling your existing home.
* If you need to carry two mortgages, you might want to consider putting a smaller down payment on your new home initially, and then paying down the principal once you sell your existing home.
* If you don’t have the money for the down payment, you may be able to secure a second mortgage equity line to use as a deposit or down payment on your next home. However, it’s important to set this up prior to putting your existing home on the market.
Selling your existing home first and then buying a new home
|You won’t have to worry about paying for two mortgages.||You may end up needing temporary housing, which can be pricey. In some towns it’s tough to find short-term rentals at all.|
|You’ll have money on hand to make an offer.||You may need to move twice, and incur double the moving costs.|
|You’ll have the security of knowing exactly how much money you have for your new home.||You may feel time pressure to quickly choose a new home.|
|Since you won’t be facing the prospect of paying for two mortgages, you’re less likely to feel under pressure to accept a low offer on your existing home.|
If you pursue this route, here are some steps you can take to minimize stress:
* Negotiate an extended close date on the sale of your current home so you have more time to find your new home.
* Talk with your listing agent about whether you should make the sale of your current home contingent on you finding a new home. Some buyers will agree to these terms if you set a time limit (for example, the home sale is subject to the seller finding suitable housing within two weeks of the accepted offer).
* Investigate temporary housing options in your area so you know what the costs are beforehand.
Ultimately there’s no right or wrong decision here. The choice of whether to buy or sell first is based on personal circumstances.Have a real estate question? Contact Kyle Mann to learn more about selling your home in the Boston suburbs. Mann is a Realtor with Gibson Sotheby’s International Realty.