Buy or Sell First

If you’re a homeowner looking to sell your home and buy another, which do you do first?
The answer is there is no correct answer. However, I believe there is a best answer. All variables must be examined before you decide. When a client asks me that question, my answer varies according to what type of market we’re currently experiencing and the client’s needs. If we’re in a buyer’s market I normally recommend selling your current home first. Here are a couple of reasons:

· In a buyer’s market, there tends to be more homes listed for sale than normal and the homes tend to take a much longer time to sell.

· Since there are plenty of homes for sale, it more than likely won’t take long for you to find a new home that suites your taste when you do get your old home under contract.

· During these times, sellers often overestimate the value of their home and underestimate the time it will take for it to sell.

· If you buy a new home before you sell your current home, you may be forced to close on the new home before selling the old home and end up carrying two mortgages while waiting on your first home to sell. This can get you into some serious financial trouble if you don’t have ready funds.

If you do sell your old home first, when you do receive an offer, make sure your counter offer states, “The contract is to be contingent on you, as the seller, obtaining a ratified contract on the new home of your choice”. This will help to keep you from having to move into temporary lodging in the case that you don’t find a new home very quickly. A downfall to this is that some buyers may not want to accept that contingency and negotiations may fall through. If they do accept the contingency, and are informed buyers, they will make sure that there are terms are in the contract stating that, “If seller does not have a ratified contract on a new home in xx number of days or by xxx date, buyer reserves the right to terminate the contract”.

To ensure you do find a new home quickly, you should be out searching for an acceptable home while your old home sits on the market. Make a list of the homes you like and list them in priority. Just don’t make an offer on any until you have a ratified contract on your old home.

When in a seller’s market, I recommend buying your new home first. Here’s why:

· In a seller’s market, homes sell much more quickly, sometimes in a matter of days. Demand is high and few homes are listed for sale.

· Because there are a limited number of homes for sale, buyer competition is tough. Even if you do find a new home you like, you may be out bid on more than one before you finally get a ratified contract on a new home.

· If you sell your current home before you buy your new home, you may be forced to move into temporary lodging until you can find and close escrow on your new home. This also means moving twice and possibly finding storage for some of your furniture if it does not all fit into the temporary lodging.

If you do find your new home first, when you make your offer on that one make sure there is a contingency stating, “This offer is contingent on buyers receiving a ratified contract and closing escrow on their current home”. If you have ready funds for closing escrow on the new home and making double mortgage payments, you may not worry about this contingency, but it will help save you money, and it makes sense. Once again, there is a down side to this contingency. The seller, knowing his home will sell to someone, if not you, may not accept the contingency leaving you still looking for a new home.

Regardless of which way you choose to do it, I highly recommend that you employ the services of an experienced Real Estate Agent to guard your interest. If verbiage is not in the contract to protect you, it can be big trouble. I had a client who told me of a previous sale with a different agent gone wrong for them. In dealing with an inexperienced agent, (this agent was a friend of theirs), they were looking to sell there current home and buy a new home on a new construction site. They placed their old home for sale and started looking for their new home. After listing the old home for sale, the market slowed considerably. Having found a suitable new home first, they made an offer and the contract was ratified with the builder. There was no protective clause in this contract for the client. When they closed escrow on the new house, the old house was still on the market and the client was now responsible for two mortgage payments each month. They carried the two mortgages for as long as they could, but finally had to file for bankruptcy because the first home never did sell. They lost the new house first and moved back to the old house. They also lose the old house and had to rent for two years while they worked on restoring their credit ratings.

To Buy or Sell First