If you need to or want to move to a new home, should you sell your house before you buy your next house? For as long as people have been moving houses they have been asking this question. There really has never been a single right answer. In making this decision, there are various factors at play that affect your decision.
Here are some benefits to selling your home first before buying a new one.
You’ll be paying just one mortgage
When you sell your old home before buying a new one you benefit from getting rid of your old mortgage before taking out a new one. This means you won’t be paying two mortgages at once. You also won’t have to worry about convincing a bank to extend you a new mortgage while you are repaying your old one, which can be difficult in the current economic climate.
Negotiate the sale price
When you are selling your old home first, you are in no hurry to settle and move into your new property. Instead, you have the time and the space to negotiate on price, and you don’t have to take the first offer a buyer makes. This will often mean you can secure a higher sale price because the sellers know you’re not desperate to sell and can’t push you to a lower price.
Sell subject to buying a new home
If you are selling your old home and haven’t found your new home yet, you can insert a clause into the sales contract which states that the sale is contingent on closing concurrently with the purchase of your new home. This means you can sell your old house before you’ve found a new one and use the settlement period to find your new home, and with the concurrent closing contingency in the contract, you don’t have to sell your old home until you find a new one.
If you can’t get a sales contract which is subject to you buying a new home, you can still ensure a long settlement period so that in that time you have a good chance of finding a new home. During the contingency period you can also still back out of the sale contract and you don’t have to sell your home if the house hunt doesn’t go well.
Rent from your buyer
If you sell your home before buying a new one you also have the option to continue to rent your home from your buyer after the sale. Some buyers won’t want to move in right away, and will let you rent from them after the settlement while you find your new home.
Selling is harder than buying
Selling your old home will be the hardest part of the process because even in the best real estate market you will find it easier to buy a home that to sell one. As a buyer you have a range of choices, but when you are selling you are at the mercy of the market. Therefore, it is best to get the hardest part of the process out of the way first. Houses are on the market at the moment for an average of nine months, so if you had already bought a new home and were trying to sell your old home during the settlement or escrow period, you would be hard pressed to do so.
You’ll know your sale price
If you buy a new home before selling your old one you are guessing at what your old house will sell for and how much of a profit you will make in equity. However the reality of your sale price could be very different and when you sell your house first you have the benefit of knowing exactly what sort of financial position you are in.
Make your life easier
Buying and selling a home are both major transactions, so undertaking just one at a time gives you the benefit of reducing your stress levels and some of the pressure of the transactions.
You’ll be an unimpaired buyer
Many home sales fall through because the buyer was waiting to sell their old home and had to pull out of the sale. As a result, many sellers will avoid signing a contract with a buyer who has yet to sell their old home, but if you do this first, you can enter the market as an unimpaired buyer – a seller’s dream.