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Should You Buy or Sell First? Solving the Dilemma in Real Estate Transactions

  • grace264
  • Mar 14
  • 3 min read


Most people looking to buy a home are likely already homeowners, meaning they will need to sell their current home in order to purchase a new one. The biggest dilemma they face is whether to sell their existing home before buying a new one or buy a new home before selling their current one. Each option has its pros and cons, and the right strategy depends on your unique situation.

Selling First: Pros and Considerations

Selling your current home before buying a new one is often seen as the safer choice.

Advantages:

  • Selling your current home provides you with the equity needed to purchase a new home, making financing easier.

  • You won't need to worry about managing two home loans simultaneously, reducing financial strain.

  • After selling, you can wait for the right market conditions to buy your new home.

Disadvantages:

  • Once your home is sold, you may need temporary housing until you find and close on a new home.

  • You may have to move twice, which could result in added costs and hassle.

  • Keeping your home in perfect condition for showings can be stressful, especially with a family or pets.

If you choose to sell first, it's important to have a solid sales strategy and quickly find your next home.

Buying First: Pros and Considerations

Some people opt to buy a new home before selling their current one.

Advantages:

  • You only need to move once, avoiding the costs and inconvenience of multiple moves.

  • You can take your time finding the right home without the pressure of a time crunch.

  • You won’t need to find temporary housing, ensuring more stability during the transition.

Disadvantages:

  • Until your current home sells, you may need to carry two mortgages.

  • If your current home doesn’t sell quickly, securing a loan for the new house might become difficult.

  • Market fluctuations could result in your current home selling for less than expected.

To minimize the downsides, it's important to consider suitable financial options to support buying first.

Financial Options When Buying First

To buy a new home before selling, you’ll need financial flexibility, and there are various options to help you manage this:

  1. Contingency Contracts

    • Your offer to purchase a new home is contingent on the sale of your current home.

    • If your home doesn’t sell within a specified time, you can cancel the agreement.

    • However, in a competitive market, few sellers may accept this condition.

  2. Home Equity Loan

    • You can take out a loan using the equity in your current home to cover the down payment or initial costs of a new home.

    • The interest rates are usually lower than a standard mortgage.

    • However, if your current home doesn’t sell, you could face increased financial strain.

  3. Bridge Loan

    • A short-term loan using your current home as collateral, allowing you to buy a new home before selling your old one.

    • These loans tend to have higher interest rates and can incur additional costs if your current home sells slower than anticipated.

  4. Guaranteed Offer or Trade-in Programs

    • Some real estate companies offer programs where they buy your current home immediately.

    • This makes financing the new home easier but often results in selling for less than market value.

Creating an Effective Buy-Sell Strategy

Timing the purchase and sale of a home is a crucial decision, and there are a few strategies to ensure a smoother transaction:

  1. Get Pre-Approved for a Mortgage

    • If buying first, get pre-approved for a mortgage so you can move quickly when you find the right home.

  2. Work with an Experienced Real Estate Professional

    • Coordinating the buying and selling process can be complicated, so working with a real estate expert can help you navigate both transactions smoothly.

    • A professional can help optimize timing and negotiate the best deal for both buying and selling.

  3. Adjust Closing Timelines and Terms

    • Rent-back agreements allow you to stay in your old home after the sale for a period of time.

    • Extended closing periods give you time to align the closing of your new home with the sale of your current home.

  4. Prepare Your Home for Quick Sale

    • If you buy first, be prepared to sell your old home quickly by setting a competitive price and employing an attractive marketing strategy.

Conclusion

Whether you buy or sell first depends on your specific circumstances.

  • If you want to minimize financial strain, selling first may be the better option.

  • If you prioritize stability and convenience, buying first could be the right choice.

Each option has its advantages and challenges, so it’s important to consult with a real estate expert to develop a strategy that fits your needs.

 



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