A big porch, a beautiful new kitchen, creative built-in furniture, and hidden storage spaces - we know, it's hard to stop fantasizing about your future home. Many of us find pictures on the Internet and create visual representations of what we want to achieve in each room. But before you can move into your new home, you have first to decide what to do with your old one.
During this time, you may wonder whether selling your current home before buying a new one is a good idea. Do you go for the safe route of selling the home first? This way, you're potentially dealing with moving twice. Or is it a better idea to just buy the house of your dreams right away and risk paying two mortgages for some time?
Naturally, both options have their respective pros and cons. So, we took our time and investigated them. We read surveys, analyzed the data, and talked to some of the best real estate agents on the market to get to the bottom of this. And it seems that digging a little deeper pays off as we found ways to make every option work. Here's what you need to know.
Understand the market
The first thing you need to do is find out what type of market you're dealing with. The state of the real estate market is one of the most important factors to consider when choosing a path to follow.
Check out the housing market analysis to determine if you should sell the house before purchasing another one. Also, make sure to discuss your plans with your real estate agent, as they can guide you in the right direction.
Buyer's market
With a buyer's market, it's a no-brainer. Most of the time, the inventory in this market type is high, so there is no downward pressure on prices, and homes stay on it for longer. Therefore, you should list your home as soon as possible, assuming that it won't sell right away.
While the house is waiting to be sold, you can shop for a new one. Ideally, you'll be in a position where you can align the buying and selling transactions, so that you don't have to move twice.
Seller's market
Contrary to the previous one, the seller's market always has low inventory and high competition when it comes to potential buyers. In this scenario, homes sell quickly. However, you will probably need some time to find a new place to call your own. Therefore, the best idea is to put up your home as soon as something you like comes onto the market.
Although this path can undoubtedly pay off, it demands a little more time and dedication. You will have to relocate to your new home quickly, so you will need to handle many tasks in a short amount of time. Make sure that you don't let time slip away - pack as many things as you can beforehand and make a plan for packing everything else.
Sell your home first
Selling your current home before buying a new one is the most straightforward approach you can take. It's much more practical financially too, especially if you know how to boost the property value of your home. After you sell it, you'll know exactly how big your budget is with all the repairs, preparations, and taxes.
However, financial security comes at a price of emotional risk. Potentially, you'll have to move twice and find temporary accommodation while you're searching for a new house. Both of these things can be stressful.
Upsides:
- Buying with an exact budget
- Financing is not a problem
- You can benefit from market shifts
- Less pressure for finding the right home
Downsides:
- Missing your dream home
- Living in a temporary place
- Moving twice
- Taking a risk with market
If you find this option more appealing, think about transitioning via rent back. You make a deal with a buyer and rent a home from him while you secure the new house. It may sound strange, but this works. Finding temporary housing is the other option. If you are moving with a big family, these two options might be just what you need.
Buy a new house first
If you're impatient or if you stumble across the perfect house before your home sells, there's a chance that you won't be able to resist the temptation.
This is a financially more complicated route, as you'll need to make the down payment and carry two mortgages for some time. It's easier to make it work with a bridge loan, but you'll have to have a high credit score and debt-to-income ratio. On the other hand, it seems that homes across the country are selling fast. So, if you price your home correctly, it should go in no time on the seller's market.
Upsides:
- Securing the perfect home
- Moving only once
- Benefit from the market shift
Downsides:
- Paying two mortgages
- Having to take high-interest loans
- Feeling pressure to sell quickly
The best way to make this work is to make a contingent offer. This means that you'll enter a contract on a new house as soon as your home sells. But what if it doesn't? Obviously, sellers have higher risks here, so they'll take it only if they're satisfied with the price.
Buy and sell at the same time
The best possible scenario you can encounter is this. And you'll need a bit of luck and lots of planning to make it work, but it is manageable. To make your chances as high as possible, use the same agent for selling and buying. If you choose to work with a top agent, you'll have more luck with contingent offers, and you may even score a discount.
Conclusion
As you can see, selling your current home before buying a new one is not necessarily a good idea, but it's not a bad one either. It all depends on the market and your financial abilities. So, choose the path that will work the best for you as that's the only thing that matters.