What came first? The chicken or the egg? Well…I’m not going to answer that today (though I do have an opinion); rather, I’m going to delve into the real estate equivalent:
Do you sell your existing home first OR do you buy the new home first?
If you’re lucky enough to be moving from a rental or family situation, then save this information for another day. The rest of you have a potentially tough decision to make.
There are certainly dangers to either strategy. If you sell first, but can’t find “the right home” quickly, you could end up homeless. If you buy first, but can’t sell quickly, you could end up with two mortgages. Either of those options sound appealing? No? Well, lucky for you, you’re not the first one to struggle with this conundrum, and there are some questions and pointers that might help you make a plan.
Financially Speaking
For a lot of people, you can answer which step comes first by asking one simple question: Can you get approved for a second mortgage? Most people can’t; therefore, most people can’t buy first. Sure, you can make an offer on a home with a “right of first refusal,” but it’s a super week offer. In this active market, you’d be lucky to get an offer accepted with that kind of contingency, and even if you did, some other buyer will probably come boot you out before you can get your house listed and under contract.
If you can get approved for a second mortgage, you have to ask yourself, “If worst comes to worst, am I okay with two mortgage payments?” And, if so, for how long?
I’m assuming (based on experience) that most people do not have enough cash to purchase their second home without selling the first.
Ask me for a great lender referral.
An Ideal World
Here’s the ideal situation:
- List your current home
- Get offer/contract on your current home
- Negotiate enough time (60+/- days) to find your next home and…
- Close both houses on the same day
Believe it or not, this scenario DOES work for many people.
A Good Backup Plan
Always have a good backup plan…or two. The “ideal world” scenario doesn’t occur for everyone, so be realistic and have a plan in place. For lots of people this is a short-term rental home/apartment and a storage unit. For others it may be a spare bedroom with family and throwing your boxes in their garage.
The Bottom Line
The bottom line is this: You stand to make a much stronger offer when you don’t have another house to sell. Sellers are more likely to work with a buyer who doesn’t bring a boat-load of contingencies. Keep that in mind as you make your decision.
Connect with a Realtor®, who can advise you based on your circumstances and help you each step of the way. If you’re in the Greater Richmond area, I’d love to be your trusted advisor. Just reach out.
What’s on the market right now in your area? Take a look.
What’s your home worth? Take a look.
