Deciding whether to purchase a new home before you’ve sold the one you’re living in is a tough call. Almost as tough as deciding whether the chicken preceded the egg.
There are a several ways you can proceed: You can buy your new home then list your current residence; you can sell your home and then start looking for a new place to live; or, you can do something in between.
Choosing which path is best for you means you have to acquire a little knowledge in advance.
First, you have to identify the market you’re in. If you’re in a buyer’s market (where there are more homes available than qualified buyers to purchase them), you shouldn’t have much trouble locating the right home for you. In fact, you may even get it for a lower price.
However, as a seller in a buyer’s market, you may have trouble selling your home quickly, or for as much money as you had hoped. While you may be able to purchase your new home for less cash, you may also have to lower your listing price to attract more buyers.
In a seller’s market (where there are more qualified buyers than homes for sale), the reverse is true. You may have no trouble at all selling your home, and you may even get more money for it than you’d hoped. However, as a buyer, you may find yourself in competition with other buyers for the same properties.
Most markets are balanced, which means there is about the same number of home buyers as home sellers.
Once you understand what is happening in your local market, you can make a decision about whether to first buy or sell, or attempt both at the same time.
If you’re living in a neighborhood where buyers rule the roost, you should try to sell your home before you put a contract on another. You will need to expend more energy getting your home to stand out above the crowd. You’ll have plenty of competition, which means you’ll have to be competitive on the condition on your home and your price. Despite being competitive, it may still take time to sell your home in a slow market.
If you’re hoping to sell quickly in a buyer’s market, you may have to cut your list price very close to, or below, what you hope to get for the property. Buyers may test your resolve by offering a very low purchase price for your home. Whether or not you accept it depends on your timetable.
That’s why it often makes sense to list your home first before you put in an offer on another home. Once you make an offer on a new home, you may feel pressure to accept the first offer that comes along — whether or not it is the right offer for your property.
On the other hand, you don’t want to sell your home in a couple of weeks, schedule your closing for two months down the pike, and still have no idea where you’d want to move.
So while you are cleaning up your home and readying it for sale, you and your spouse should be scouting neighborhoods, deciding which community best suits your needs. While you’re interviewing listing brokers, you should be identifying which blocks are best, which housing styles you prefer, and getting a general sense of what the market is like in your new neighborhood.
Once your home is listed, you should choose the buyer’s broker with whom you’d like to work, and start visiting some of the homes that are listed for sale. While your listing broker holds an open house, you should visit other homes that are open in your new neighborhood.
Then you should wait to buy something until you have a firm contract on your home. Once you and your buyers have agreed to terms and conditions, you can feel free to turn around and make an offer on a home.
In the best of worlds, you’ll find a new home soon after accepting a purchase contract on your property. Sometimes, however, the timing is a little off. If there is a lot of interest in your home, and you happen to find the house of your dreams, you can make a purchase contingent on the sale of your current residence.
While not every seller will accept such a contingency, it may be a way to have your cake and eat it, too.
Published: Feb 12, 1996