If you are considering looking for a new house, and are a current home-owner, then
chances are you’re wondering what your strategy should be: do you wait to find the
perfect new home before you put your current home on the market, or do you sell first
and then look around? You have a few options. Use the following as a guide to explore
what might be the best move for you.
There are several benefits to selling your current house before searching for your next
home. First of all, once you have sold your house, you will know precisely how much
money you have to work with. With a concrete price range, you’ll be able to narrow the
pool of houses before you begin looking, and negotiate accordingly. This will allow you
to immediately make firm offers on houses that you are serious about purchasing. You
can be first in line with an unconditional offer you know you can afford, and this will
grant even further negotiating leverage as Sellers tend to take unconditional offers more
seriously. When they counter or turn down an offer that’s conditional on the sale of a
home, they usually think the Buyer will come back with a better and more firm offer once
they have sold their current home. However, if you make an unconditional offer, the
Seller will usually give you more consideration, as they realize you’re probably looking
at other properties and will move on if your offer is rejected. Likewise, if you have
already sold you house, you probably do have a wider opportunity to look around,
negotiate, and find the best deal and fit for you and your family.
The flip side of this scenario, however, is that if you don’t find the right property before
the closing date of the house you’ve already sold, you may have to look for temporary
housing until you do find what you’re looking for.
So, before you opt to sell first, you should determine whether you have alternate,
temporary options, in case you have to move from your house before you’ve found a new
one. How would you and your family deal with living in a transition home for an
undetermined period of time?
Buying a new house without having sold your current home may occur if you are
interested in a specific property and will only sell your current home if this property
comes on the market. It may be a matter of timing—grabbing hold of the home before
it’s too late. The same might be said of a property you haven’t had you eye on
previously, but that catches your attention due to its uniqueness or unbelievable price. If
buying first means you don’t miss out on the real estate opportunity of a lifetime, it may
be the best move.
However, be careful. If you buy another property and aren’t able to sell your current
home quickly enough, you could end up having to finance both homes and shoulder the
extra debt until you sell. You can get a financial appraisal or market evaluation of a
home prior to selling, but this doesn’t guarantee the price you’ll ultimately receive for the
home after the negotiation process has run its course. Since your selling price will be an
unknown, jumping into a purchase could be a gamble, particularly if your budget is tight.
Make sure you’re familiar with all aspects of the financial reality this scenario would
create before you purchase another home. You may be faced with owning two homes at
once. What type of financial stress would this bring to your life and how would you deal
with it? Consider the fact that if your current house doesn’t sell quickly enough, you may
be forced to sell it off at a reduced price in order align the closing dates of your two
properties. What effect would this have on your financial situation?
An additional option involves making your offer to purchase conditional upon the sale of
your current property within a specified period. Conditional offers usually include a
clause that allows for the Sellers to keep their property on the market and remain open to
other offers while you try to sell your home. If the Sellers receive another attractive offer
before you’ve sold your home, they may accept and ask you to either remove your
condition and firm up your offer, or to back down from the offer. A conditional offer
forms a kind of middle ground, an area of compromise, for those who are afraid to sell or
buy first—but doesn’t hold the advantages of the other two options.
One of the drawbacks of the conditional offer is that Sellers tend to take them less
seriously. They definitely give stronger consideration to firm offers. This leaves you
with less negotiating power. In fact, some Sellers will simply turn down or counter a
conditional offer. Other Sellers will believe the Buyer will come back with a more
serious offer when their home has sold. So, you may end up having to increase your
offer in order to have your conditional offer accepted and keep your foot in the door of
your desired house.
Even if your conditional offer is accepted, there is no guarantee another Buyer won’t step
in and overthrow your offer before you have sold your current home, which would put
you back at the starting line. Also, consider the fact that you cannot withdraw your
conditional offer until the end of the period specified in the contract—which means that if
a better deal comes along, you will have to wait to jump at it.