Do I Buy First Or Sell First?
You need to buy a new home. Unfortunately, you
already own one. If you're like most people, you can't afford the luxury of owning two.
There's no doubt that your present home must be sold. So you ask yourself the big
question? Do I sell this one first, or do I buy my new one first and then sell it? Like
the chicken and the egg, this can be a difficult issue to reconcile. There really isn't a
right or wrong answer, but rather, a weighing of the pros and cons as they apply to your
own set of circumstances. Let's start by taking a look at the advantages and disadvantages
of each of your options.
1) Buy First and Then Sell - If you decide to buy another home and then sell your present home, you'll likely want to make your offer "subject to the sale" of your present home. Going this route will give you the confidence of knowing that you have another home to move to when yours is sold. This factor is obviously the primary benefit.
On the other hand, you should consider how this option affects your negotiating position and ultimately, the cost of this move. Let's say that you are looking at a home with a list price of $139,900.00. You determine that the seller is likely prepared to accept a good clean offer of $135,000.00. You realize that you're making a big request of this seller by asking them to take their home off of the market, while you sell yours, knowing full well that yours might not sell within a reasonable period of time. How much more will this seller expect to be paid to accommodate this major condition? Is it unreasonable for the seller to expect you to pay $137,000.00 or $138,000.00 in exchange for agreeing to the "subject to" clause? The seller won't likely think so.
You should also consider the added stress that you may feel to sell your present home in the event that you've already purchased another. Is it possible that your excitement to move will cause you to be additionally motivated and more flexible in the negotiations?
2) Sell First and Then Buy - The primary disadvantage of selling before you buy is the uncertainty as to where you will go and the possibility that you may have to move twice, once to a rental home and then to the new home you purchase.
On the other hand, if you sell first, your negotiating position will be enhanced in both transactions. When you sell your present home, there will not be any other external factors that will cause you to accept less than you really should. Provided that you have an objective perspective on the property's market value, you'll be in a good position to hold out and get your price. Also remember that as the seller, you are in a position to reject any proposed possession date that does not allow adequate time to find a new home.
Once your present home is sold, you can begin to shop for your new home with confidence. You'll know exactly how much money you'll be netting from your sale, totally eliminating speculation. You'll be in a position to make a stronger offer on the next home and likely have greater success in negotiating a more favorable price and terms.