If you own your home but want to upgrade, downsize, relocate or finally buy your dream home, you will face a common real estate conundrum—Should you sell your home before or after buying a new one?
There are many factors to consider when deciding if it’s best to sell your current home before or after buying a new home.
One of the most important first steps is determining the state of the market. Is the current real estate market a buyer’s or seller’s market? Check with your real estate agent to get advice on your local market and read Determining the Local Housing Market: Buyers or Sellers Market, published by Zillow.
The general rule of thumb is it’s often best to sell your home first in a buyer’s market and buy your new home first in a seller’s market.
Homes take longer to sell in a buyer’s market where there are plenty of homes available and fewer buyers. It makes sense to sell first in this market because your home may not sell right away, and you may have to sell it for less than you anticipated, giving you less money to put toward your new home.
In a seller’s market homes generally sell quickly at a higher price because there are fewer homes available and more competition. This gives you time to find the home you really want knowing you will be able to sell your other home quickly and not have to carry two mortgages for an extended period.
The benefits of selling first include not having to qualify for or carry two mortgages and using cash from the sale toward the purchase of a new home. Because you have more time to sell your home, you can hold out for a higher offer. Some buyers will agree to rent back your home to you while you are looking for a new one so you don’t have to move twice or find temporary housing.
Some of the problems you may face if you sell first include feeling rushed to find a new home because of the cost of temporary housing or the inconvenience of staying with friends or family. You may also have the extra expense and effort of moving twice and possibly keeping many belongings in storage. If you are living in the home you are selling, you will need to keep it clean and organized and be ready to leave anytime your real estate agent has a showing. This can be difficult with a family.
The benefits of buying first include avoiding a rushed purchase or missing the home of your dreams because you are waiting on the sale of your current home. Sellers often won’t take a contingent offer seriously in a seller’s market. You will only have to move once, and you won’t have the inconvenience of living in a home you are trying to sell. In a seller’s market, home prices could rise between the time you buy a new home and when you sell your old home allowing you to earn more on the sale. In a buyer’s market, you can rent your old home if it doesn’t sell quickly to cover that mortgage until it sells.
Some of the downsides of buying first are having to qualify for and pay two mortgages, or possibly taking on a high-interest short-term loan to make the down payment on the new home. In a buyer’s market, the price of your old home could go down while on the market. You may also feel more urgency to sell it and be willing to take less for it to get out of paying two mortgages.
In making a decision on whether to sell your home before or after buying a new one, it’s important to determine the market, look carefully at your finances, and review the pros and cons listed above to get a feel for which path works best for your situation.
If you are ready to upgrade your lifestyle and rightsize your dream home, Epcon Communities invites you to take a closer look at the freedom and quality our homes and communities offer. The “lock and leave” lifestyle of our communities around the country gives homeowners more time for fun. And the community amenities make it convenient to be active and safely social. Take a look at our award-winning, beautiful new homes and contact us to take the next step toward living the life you want.