Homeowners who are planning to move up often wrestle with the dilemma: "Should we sell first or buy first?" You'll find plenty of agents advising you to buy before you sell, but that's rarely in your best interest. It's in the agent's best interest because if you buy, you will need to sell, and the agent will be guaranteed two sales, regardless of how much it cost you to do it this way.
If you decide to sell first and then buy but, say, your home doesn't sell or it attracts very low offers that you do not want to accept, the agent will get nothing. Think about it.
Of course, which comes first, the chicken or the egg, depends on the market -- is it a buyer's or a seller's market -- and your personal motivation. However, for most sellers and buyers, the smart thing to do is to sell before you buy.
Reasons to Sell First and Then Buy
- Ability to Negotiate.
By selling first, you have the luxury of time. You don't have to take the first offer that comes along because you already have a place to live. It's called your home.
- Higher Sales Price.
Sellers who aren't under pressure to sell often obtain higher sales prices because buyers realize the sellers are not desperate. Nothing yells "discount your offer" like a listing that reads: "seller motivated, bought another."
- Contingent on Concurrent Closing.
By making the sale of your home contingent on closing concurrently with your new purchase, you have basically said to the buyer, "If I can't find the home I want to buy, I'm under no obligation to sell to you." You don't have to name the property address. You can simply state: "This sale contingent on closing concurrently with the purchase of seller's replacement home."
In fairness, a smart buyer's agent won't let a buyer sign a contract with a contingency clause like that; however, I get away with inserting that clause because few agents understand its implication.
- Contingency Period.
OK, let's say the buyer's agent is smart enough to strike a concurrent closing clause from the contract. The next best thing to ask for is a time period during which you are free to look for a replacement home. A contingency period will give you the right to cancel the contract during that time period if you so choose, which can range, on average, from 7 to 21 days.
- Renting After Closing.
Some sellers who want to take their time to find the perfect home, that one-in-a-million, will often opt to rent after closing. If the buyer doesn't require immediate occupancy, the seller might rent back their own home for the amount of the buyer's new mortgage payment. Or the seller might move out, put their belongings into storage and rent a furnished, short-term apartment.
Reasons to Buy First and Then Sell
- It's a Seller's Market.
When the number of buyers are many and inventory is reduced, homes generally sell within days of hitting the market. In this instance, there is little risk in buying first and selling second. However, few sellers will accept a contingent offer. Since these sellers will not accept a sale-contingent offer, you could be stuck owning two residences until your home sells. On top of that, you will pay top dollar for your new home, especially if you end up bidding in a multiple offer situation.
- Deal is Too Good to Wait.
Sometimes, regardless of the marketplace, a home will come on the market at a price that is too good to pass up. Perhaps the sellers are getting divorced, need to pay medical bills or one of them has a gambling addiction with debts to pay; the point is the sellers are extremely motivated to sell. Before word spreads across town, you might want to be the first offer on the table.
In this instance, it makes sense to buy before you sell because the money you make walking into the deal is worth making double payments until your home sells. When the deal is that good, pull out all your negotiating tricks.
- It's Your Dream Home.
This is an emotional decision. As much as many buyers might want to be logical and analytical, people who let their hearts rule are not. Real estate is an emotional business anyway, so those who fixate on owning a certain type of home may as well buy it when they first spot it. For some, money is no object. Fortunately, these types of buyers rarely look back, but keep their sights set on the horizon, on moving forward, and they don't regret making emotional decisions. They want what they want, and they get what they want.
Whatever you decide, please contact me first! I can help you decide what is best for your situation!