Of the decisions you must make during the home buying and selling processes, whether you should sell your house before purchasing a new property is one of the biggest. Let's look at the factors to weigh, and the pros and cons of either buying and selling first.
Should you buy now, or buy later? The goal is always to sell your home during a good market and hopefully purchase your next home at its lowest price. Monitoring the market or consulting a professional can help you decide when to buy and sell.
It goes without saying that your economic and financial position can impact when you buy or sell. Beyond choosing a property in your price range, there are many other factors. Do you and the people living with you already have jobs lined up in the area you’re moving to, or will you be using savings for some time? Is where you’re moving to higher, lower, or the same with regards to the cost of living?
Your level of flexibility can determine when you sell. If you buy first, you have a place to move into immediately. If you sell first, you may find yourself renting and moving around a little more. Sometimes stress is worth mitigating despite the price tag of buying first, and if that sounds appealing, that might guide your decision.
Moving is already a hassle, and the process is only made more stressful when accompanied by children and pets. When moving, it may be worth asking yourself about the impact moving will have on kids and animals, as changing homes too often can be especially confusing for them.
Buying first is the most ideal option for most but can be financially difficult to achieve. When you buy first, the property transition process is done at your pace and on your timeline.
There are many instances where the property market hardens, or prices go up as a whole. In situations like these, buying first can help you save thousands of dollars on your new home. The risk is that it’s often hard to say when a housing market will increase or decrease. Similarly, you face the same market when you sell — so buying first and selling your home for less down the line could have you spending about the same amount had you done them in reverse. Altogether though, if a house’s price is at the ideal spot, it’s worth grabbing it before it’s gone.
The only thing more cumbersome than moving your items is having to move them twice. When a house is sold, the owners must move out by the settlement date. If there’s no new home already purchased, that means moving into a rental home, rented apartment, or hotel. Moreover, personal items and furniture may need to be stored at a facility for the time being. When you buy first, you move directly into your new home. You avoid the cost of paying rent, plus miscellaneous other fees associated with storage and movers.
Finances aside, there is one huge reason homeowners choose to buy first: it’s a dream home. Houses or properties with high amounts of competition often result in emotional decisions that drive buying first, despite the necessity for two home loans and a faster selling process of the current property. If you’re fixated on one property, and it seems like everyone else is too, it may be worth buying before your current house is sold. With that said, this decision is typically made by those where money is no object or their financial situation is above-average.
Selling first can be seen as more stressful, but it’s the most common method of home selling and buying when moving between properties.
Especially in more volatile housing markets, it makes the most sense to sell first. Once your house has been closed on, you’ll know exactly how much money and capital you have to purchase a new one. If you buy first, the market could swing down (or, on the positive side, up!) and prevent you from receiving your ideal asking price. When this happens, you risk overshooting your budget for the new home based on what you think your house will sell for, even though no price is guaranteed.
Two houses mean two mortgages, and being in the possession of both your old home and future home simultaneously can turn out to be expensive. When you sell first, you no longer need to worry about the potentiality of having two home loans at once. Just make sure to do your math first and see if paying two mortgages is cheaper than selling one home and having to rent. There are many cities where renting is exponentially more expensive than having a mortgage!
A combination of the above two benefits, selling first allows for increased buying power. This isn’t just because you’re aware of the capital allotted for a new home but because a bank is. Home loan providers are more likely to give you more capital to borrow if your home has already sold, whereas an existing mortgage may reduce your buying power as you apply for another home loan. For those with more equity in their homes, then increased buying power is already present, so selling first may not be necessary.
Not quite sure where you want to move yet? The benefits of selling first mean you’re not locked into any one particular neighborhood. This gives you the ability to rent in a few places and get a feel for the surroundings before deciding to permanently move. Of course, if you already have your heart set on a certain area, this benefit doesn’t weigh quite as much — but it can still help you decide which part of town you like best!
The best of both worlds is possible when you sell first. If a buyer has decided on your home, it’s always possible to continue negotiations for when you move out, or your settlement date. An extended settlement date allows you to continue living in your home as you continue the search for your next one, all while knowing that the property has already sold. Keep in mind that an extended settlement date may come with qualifiers on behalf of the buyer, often concerning the condition of the house that must be maintained for the sale to be finalized.
Overall, sales driven by emotion are often better to buy first and seller later, whereas logic and economic resources favor selling first and then purchasing your new property. Ultimately though, it’s up to you as a homeowner to make the decision that’s best for you. It may be helpful to consult with a home finance manager, your agent or brokerage, and other professionals before making a decision. Many homeowners even make this decision long before listing their homes or beginning their search, simply to guide their selling process. To ease your realty process, get connected with knowledgeable professionals, and feel secure in your buying decisions, choose to join taelah! taelah is a human-assisted artificial intelligence system that helps homeowners connect with top real estate agents, and offers guidance through big decisions like deciding when exactly to sell. Join taelah today for answers to all of your biggest home buying questions!
Searching for a new home is exciting, but should you close the deal on your new property before or after selling your existing house? While there are pros and cons to each, selling your house first generally has more benefits. For one, it offers increased financial security when acquiring home loans and determining available equity for the next property. Additionally, you can negotiate settlement dates or even rent in the area you're hoping to move. Conversely, buying first offers snagging your dream house before someone else can, and avoids having to move more than once. Ultimately, you'll want to consult with professionals before making a decision, and taelah can help!