Should I buy first or sell first?
This has always been a thought-provoking question for people who already own a home and are looking to sell and move to another. The fact is, no matter how you go about it, there will likely be some stress involved, and there are pros and cons no matter which route you take.
Being in a hot seller’s market for what feels like years now, there are many who believe that there is only one way to go about this process, and that is to buy first. But there are still some benefits to selling first, even in our current market. Every situation is different and needs to be dealt with accordingly. The clients are different and so are the types of properties they have to sell, as well as the types of properties they wish to purchase.
If you buy first ~especially if you don’t include any conditions in your offer~ then the pressure is on to sell your house pronto. Unless you negotiate a long closing for your purchase. A 90 or 120 day closing on your purchase would offer a nice buffer to get your house on the market and get it sold. The greatest pressure occurs when you have a short closing on the home you’ve purchased, and the home you have to sell is not a typical home, so the buying pool is more limited than the buying pool for more standard homes. This is all the more reason to ensure that the home you have to sell is nearly ready to begin showing potential buyers.
If you sell first ~especially without a place to go to next, such as to temporarily stay with a family member~ then the pressure is on to find your next home pronto. Unless you negotiate a long closing for your sale or even included a condition to purchase a home. This is something you can usually get away with when you’re the seller because you have more power than the buyer in this market. The part about taking this strategy that has a major downside, though, is that some people don’t act quickly enough and end up just settling into their “temporary” place for a little longer than they initially intended, and, in the meantime, the prices for a place to purchase continued to increase in price and were all of a sudden out of their reach.
The downside to buying first is that you may have to bid a lot in order to get the house you want, and all the while, you really don’t know what your house is going to sell for. This can be very risky if you don’t have a lot of equity in the home you need to sell.
The upside to buying first is having peace of mind that you will have a place to call home once your house is sold. And it may be worth it to have this security even if it costs you more to have that assurance.
The only main downside to selling first is that you could be homeless if you don’t have a back-up plan of where to go next. People used to be able to have a bit more buying power by going in with an unconditional offer if they have sold their home first, but the majority of buyers these days are coming with a firm offer regardless of whether or not they have sold before offering or need to sell after offering. The playing field is more level than it has ever been.
The upside to selling first is knowing exactly what you’re going to have in your pocket on closing, so this enables you to know what type of home you can afford to purchase. This is a great option for folks who are open in terms of location. It doesn’t work as well for someone who really needs to be in a certain neighbourhood or a certain type of home. This is also a good option for a couple who may be splitting up and two people need to split the proceeds of the house sale to start over somewhere else.
There really is no easy way to know what is best for your situation. This is something that will take much consideration concerning your financial situation, your search criteria, and your ability to be able to handle stress and risk.
There used to be more safeguards to help buyers and sellers throughout the process, which gave people an out in case the financing fell through or in case the house didn’t sell. But, right now, with such a shortage of inventory, much of these safeguards that we had grown accustomed to in the past, they have sadly mostly gone by the wayside. I hate to put it so bluntly, but these really are the cold hard facts especially in such a tough market.
But, that doesn’t mean that there are no safeguards, just simply that the way that buyers and sellers are manoeuvring their way through the process looks different than it did in the past. Rather than putting conditions in their offer, most are doing more homework upfront prior to offering.
That leads me to my most important tidbit of advice. Whatever you choose to do, and in whatever order you choose to do it, I would highly recommend first that you secure a group of professionals to help you sort through the options that work best for your given situation. Such decisions are not advised to be made on your own. The help of a trusted Realtor, mortgage agent, home inspector and real estate lawyer is crucial to help you to ensure that the risks you are taking have been calculated upfront with the advice of the professionals.