Buy or Sell your Home First? Which is your Best Option?
If you own a home and are considering the purchase of another home, the
question of whether you should buy your next home first or wait and sell
your existing home always seems to arise. Everyone's situation is
certainly different, but it can help in making a decision to understand
the full range of options available to you.
In the event you choose to sell your existing home first, you will have
the advantage of know precisely how much money you will receive at
closing, which can be quite helpful in establishing a price range for
the purchase of your next home. Of course, you must also consider the
fact that you may not be able to find another home that is satisfactory
prior to closing on your existing home. That could mean that you will
either need to find somewhere else to live on a temporary basis or else
settle for something that may not be quite what you wanted. If you
choose to live somewhere temporarily until the right replacement home
does come along, you should be prepared for additional costs that can
arise, particularly if it takes awhile to find exactly what you are
looking for.
On the flip side, if you choose to buy first, you must live with the
knowledge that you may not know exactly how much you will be walking
away with when your home does sell or even when that will be. This means
that you may be facing the reality of two mortgages until your current
home sells, something that may not be financially feasible for you. You
may also have trouble being approved for a mortgage on the purchase of a
second home when you still have a mortgage on the first home.
When trying to decide whether it would be best to sell or buy first, it
is always important to consider the current market conditions. For the
most part, it is usually best if you buy another home before selling
your existing home if the current market is a seller's market and home
prices are on the rise. The thought process behind this is that if
prices are on the rise, it is better to lock in the price of the new you
will be purchasing while allowing you to sell your existing home at a
higher price with the assumption that prices will continue to rise.
On the other hand, if you are in a buyer's market and home prices are on
the decline, it usually makes more sense to sell your existing home
before proceeding with the purchase of another home. This strategy will
allow you to lock in the amount you will receive for the sale of your
current home before the housing market declines any further and you will
also be able to better take advantage of lower prices when you buy
later.
It should be kept in mind that the housing market in any particular area
can change quite fast and market conditions can be based on a variety of
different factors. Remember as well that while the national market may
indicate one thing that cannot always be true of a local independent
market. A professional real estate agent can assist you in determining
the local market conditions within your own area.
If you are really interested in buying another home before waiting to
sell your existing home, one option to consider is making your purchase
offer conditional on the sell of your existing home. Through this type
of contingency, your offer will only become binding if you agree to a
purchase offer on your existing home with a specified time period, such
as 30-60 days.
For your own protection, it is important to be certain that any type of
conditional offer clearly states the precise condition that must be met
as well as the length of time that is available for that contingency to
be met. In some instances, sellers are more or less willing to accept a
conditional-on-sale offer based on market conditions and how motivated
they are to sell.
Ultimately the decision of whether to sell first or buy first is
completely a personal decision that should be based on your own
particular circumstances and local market conditions. If you decide that
you would like to make an offer to purchase a home, do ensure that your
offer is phrased correctly for the contingency on sale to be certain
that your best interests are represented. Also, if a prospective buyer
makes a conditional offer to purchase your own home, have the offer
carefully reviewed as well.
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