What to do when you’re both a buyer and a seller
Buying a home is a complex process that involves many steps, and things get even more convoluted when you add selling your current home to the mix. Should you sell first and then buy? Or buy and then sell? Much depends on market conditions (is it a buyer’s or a seller’s market?) and the current state of your finances.
SELLING FIRST
Most people find selling first to be the safer tactic as there’s less financial risk involved, and this often proves especially true in a buyer’s market. The biggest pro of selling first is that you’ll know exactly how much money you have to work with. Houses often sell higher or lower than the asking price, making the amount you can realistically afford unclear until you’ve accepted an offer. Knowing how much buying power you have allows you to make the best possible purchase at a price you can afford. Another noteworthy pro is that financing is much easier to come by when you aren’t encumbered by a pre-existing mortgage. So what’s the downside? If your home sells before you’ve bought another, you may have to find a temporary place to live. This can mean putting your belongings in storage and renting for a while, or staying with family until you can find a place to lay down new roots. BUYING FIRST In a seller’s market, buying first might be feasible, especially if you’re confident that your home will find a buyer quickly. The biggest perk is that you can move into your new abode at a comfortable pace and ease into the selling process. If you’ve already paid off your loans on the old home, there are few problems with this scenario. However, if you’re still paying off the first mortgage, you may run into troubles should the sale take longer than expected. Carrying the weight of two mortgages is a financial burden that most of us can’t uphold for long. You also might find that getting a mortgage for the new home is problematic, as many lenders are wary of lending to individuals with a high debt-to-income ratio. You’ll also need to possess or borrow the required funds for your down payment and closing costs.
MULTI-TASKING
No matter which strategy suits you best, it’s wise to keep a pot simmering on the other burner. If you’re selling first, you should still research the market where you want to buy, keep your credit scores high, and gather information about loans and lenders. If you’re buying first, you should still be readying your current home for the selling process — cleaning, decluttering, and making needed repairs — as well as researching your local realtors.