If you are a current homeowner considering the purchase of a new house, chances are you’re wondering what your strategy should be: Do you wait to find the perfect new home before putting your current home on the market? Or, do you sell first and then look around? You do have options. The following general guide can help you explore what might be the best for you.
There are several benefits to selling your current home before searching for your next one. First of all, once you have sold your house, you will know precisely how much money you have to work with. With a concrete price range, you’ll be able to narrow the pool of houses before you begin looking, and negotiate accordingly. This will allow you to make immediate and firm offers on homes you are serious about purchasing. You can be first in line with an offer that has fewer conditions and that you know you can afford. This will grant you negotiating leverage as sellers tend to take offers with fewer conditions more seriously. If you can make an offer that is not subject to the sale of your home, for example, the seller is likely to give you more consideration as they realize you’re probably looking at other properties because you need to buy a new home and will likely move on if your offer is rejected. Similarly, if you have already sold your house, you probably have a more opportunity to look around, negotiate and find the best deal and fit for you and your family.
The flip side of this scenario, however, is that if you don’t find the right property before the closing date of the house you’ve already sold, you may have to look for temporary housing until you find what you’re looking for. An additional consideration is that if it is a ‘sellers’ market’ and one that is appreciating, the longer it takes to find a home the more it will cost you.
So before you opt to sell first, determine whether you have alternate, temporary options in the event you have to move from your house before you’ve found a new one, and that you have a thorough understanding of the real estate market conditions. How would you and your family deal with living in a transition home for an undetermined period of time in a market that is appreciating or depreciating?
Buying a new house without having sold your current home may occur if you are interested in a specific property and will only sell your current home if this desired property comes on the market. It may be a matter of timing and of seizing the opportune home before it’s too late. The same might be said of a property you haven’t had an interest in previously, but that catches your attention because of its uniqueness or attractive price. If buying first means you don’t miss out on the real estate opportunity of a lifetime, it may be the best move.
However, be careful. If you buy another property and aren’t able to sell your current home quickly enough, you could be in the situation of having to finance both homes and shoulder the extra debt until you sell. You can get a financial appraisal or market evaluation of a home prior to selling, but this doesn’t guarantee the price you’ll ultimately receive for the home after the negotiation process has run its course. Since your selling price will be an unknown, jumping into a purchase could be a gamble, particularly if your budget is tight.
Make sure you’re familiar with all aspects of the financial reality this scenario would create before you purchase another home. You may be faced with owning two homes at once. What type of financial stress would this bring to your life and how would you deal with it? Consider the fact that if your current house doesn’t sell quickly enough, you may be forced to sell it at a reduced price to align the closing dates of your two properties. What effect would this have on your financial situation?
An additional option involves making your offer to purchase conditional upon the sale of your current property within a specified period. Conditional offers usually include a clause that allows sellers to keep their property on the market and remain open to other offers while you try to sell your home. If the sellers receive another attractive offer before you’ve sold your home, they may accept and ask you to either remove your condition and firm up your offer, or to back down from the offer. A conditional offer forms a kind of middle ground, an area of compromise, for those who are afraid to sell or buy first, but doesn’t hold the advantages of the other two options.
One of the drawbacks of this type of conditional offer is that sellers tend to take them less seriously. They definitely give stronger consideration to firm offers, which leaves you with less negotiating power. In fact, some sellers will simply turn down or counter a conditional offer. Other sellers will believe the buyer will come back with a more serious offer when their home has sold. So, you may end up having to increase your offer in order to have your conditional offer accepted and keep your foot in the door of your desired house.
Even if your conditional offer is accepted, there is no guarantee another buyer won’t step in and overthrow your offer before you have sold your current home, which would put you back at the starting line. Consider, too, that you can’t withdraw your conditional offer until the end of the period specified in the contract, which means if a better deal comes along, you will have to wait to jump at it.
To learn more or to determine the best strategy for your needs, contact Kyle at email@example.com.