The most common chicken-or-egg-type question in the real estate business has to be “Should I sell my current home before buying another?”
And, like many real estate questions, the answer is: It depends. Let’s take a look at some of the factors that go into making the decision about whether to buy or sell first.
1. Your Anxiety Tolerance
The thought of having to pay two monthly mortgage payments is enough to rattle even the most level-headed among us and folks do some crazy things when they’re anxious. I’ve seen homeowners accept ridiculously low offers just to ensure the current house sold before closing on the new house.
If this sounds like something you might do, perhaps you should wait until the current home sells before entering into an agreement to buy another. You’ll need to find a place to store your belongings (and yourself) between the time this home sells and the new home purchase is settled.
2. Money
Even if you feel you can tolerate the uncertainties of selling and buying simultaneously, will you have the money to pay two mortgage payments should the unthinkable come to pass? If not, your only choice is to sell your current home first.
You may also need the equity from the sale of your current home to use to purchase the new one. If so, you’ll need to wait until you sell, or attempt a simultaneous close. We explain that process below.
3. The Market
Sellers’ and buyers’ markets bring mixed blessings to homeowners who are attempting to sell and buy at the same time. No matter which market you find yourself in, since you are both a buyer and a seller, one of them will be against you.
In a sellers’ market, with multiple offers on the table (common in seller’s markets), not many homeowners will accept an offer that is contingent on another home selling. Your home, on the other hand, should sell quickly and for top dollar.
Your real estate agent can counsel you on how to approach whatever market you find yourself in.
The Simultaneous Close
It’s a delicate balancing act to sell one home while simultaneously purchasing another. Your best bet is to attempt a simultaneous closing ― one in which both of your transactions close on the same day.
Be aware that there are risks that accompany this process. The first transaction must go smoothly or you may not close the second.
If you’ve ever played with dominos, you can picture how they fall, with each one toppling the next. This is a graphic illustration of what could go wrong in a simultaneous closing.
Ensure that the buyers of your home are rock solid, with their financing in order and their motivation strong. Then, rely on your real estate agent’s wisdom and experience to navigate you through the process.
