Selling and Buying Decisions: Which comes first?

Real Estate

People often ask me this question...if you plan on buying your next bigger/better/dream home in the next year, when should you sell your starter/smaller/first home?

There are a couple different answers here, and the first thing I do is connect them with a mortgage broker who can give us a good financial picture.  The questions that will get answered are:

1) Can you afford to buy a home without selling your first one?  Such as carry two mortgages or a bridge loan?

This is often a debt-to-income ratio analysis which your mortgage person can do, but also includes the current equity in the house you would be selling.  So this is where I get involved, doing a pre-market listing analysis on your current home, to see what the market says it will most likely sell at.  I will also give you the average-days-to-sell picture so you know if there is a possibility of buying/selling at the same time...and which should come first.  If there is a 90-day average window in your neighborhood to sell, then we wouldn't want to go under contract on your new home until we were under contract with your old house.  And there are different options, to ask the buyers to give a flexible closing date.  In my last 2 transactions involving a buy/sell at the same time, we were fortunate to be able to negotiate with the buyers going under contract for flexible closing dates.  That led us to a more relaxed buying process.

The same goes for buying a home, if you are in a neighborhood that sells quickly.  In my last buy/sell transaction where my clients wanted to buy first in a popular area, we were able to dictate a sale and settlement contingency that allowed us a flexible close date option that could be moved from 90-30 days close if we were able to list and get under contract immediately.  That option isn't always popular with the sellers of your dream home, but if the home has been on the market a while, or you offer a higher price, you can sometimes negotiate that option.  If you can't afford to buy without selling, always, always, always have a settlement contingency on your contract for your new home!

2) Do you have a place to go if you sell first?

No one likes to be homeless!  But there is a chance that if you don't time it perfectly, your current home could sell before you buy a new one.  I always explain that storage place, temporary PODS, etc, are great ways to store all your "stuff" while you take a week's vacation in a hotel, or visit relatives.  Having that option, even though not the most desirable, can alleviate some of the home selling/buying stress.  Even if you close the same day, you will need to move out before the closing day, so that your buyers can do a walk-through, so having this in place, even if only for 1 night, is important.

The most important question to ask, may be a question that you don't know the answer to yet, and that is how do you deal with stress?  I always explain everything that can go right in this transaction, and anything that can go wrong, as well as all the steps to overcome it.  As long as you have a realtor you trust, we will work together to make your goals happen.  In my experience of doing the buy/sells at the same time, it is much less stressful to have action plans in place in case one of the closings are delayed to factors out of our control.  In the end, everything always closes, so it's usually a temporary delay, but having action plans in place, decreases the stress a lot.

Also having a mortgage broker and realtor who gives you options, rather than the one that makes him/her the most money, is also important.  Doing what's in the best interest of my clients, not me, is my goal,  as well as the brokers I work with.

Every situation is different, so if you have a question about your particular situation not covered here, please don't hesitate to call, email or text!