SHOULD YOU BUY A HOME FIRST OR SELL YOUR HOME?

Should You Buy a Home First Or Sell Your Home?

If you’re a homeowner and are looking to move up or downsize, you are probably thinking about how to handle the transition from your current home to your future. Should you first buy a new one or sell the old one? How to make it work? Even if it can get confusing in both scenarios, realtors advise selling first, especially in the market we have today. Selling first carries fewer risks and makes it easier financially.

If you decide to sell first…

Selling your old home first is the more logical move as you’ll know how much money you’ll have at hand once the home is sold. Looking for a new home will be much more comfortable knowing the exact amount is coming into your account. The only stress factor you have to deal with is time pressure if you are keen on finding a new home before closing on your old one. To help your case, you can take 90-120 days to close on the old house and get some extra time to find a new one. The worst thing that can happen is that you don’t see it in the given timeframe and have to move in with your family or go into a short-term rental until you get your place. Whatever it may be, never settle for a new home that doesn’t match your needs and wants because you have to be out of your old home by moving date.

If you decide to buy it first…

Buying a new home first is riskier, mainly because the market has gone through significant changes. Last year, we saw the government make several changes that affected the housing market, and often, people that bought a home first actually lost $50-$120k because the market shifted from a seller’s to a buyer’s in the blink of an eye. People who decide to buy first often do so with the idea of selling the old home before closing on the new one, but it doesn’t always work out like that in real life. You could quickly find yourself paying mortgages on both homes while still having to cover the down payment on the new house. In such a situation, people usually go with a home-equity line of credit to cover the down payment, but do you have the kind of income to qualify for paying off all three debts (the old mortgage, the credit line and new mortgage)? The financial burden can quickly become too much to handle and force you to sell the old home for a bargain price to reduce your costs.

Even if it seems a bit complicated in both case scenarios, the sell-first-then-buy strategy sounds more promising at the moment, simply because the market is uncertain, and we don’t know what will happen. On the other hand, buying first requires a deep pocket to withstand the financial pressure even if the market conditions should go in your favour.