It’s that time! You’re ready to shop for a new home and wondering what steps to take first. Do you sell your home before you buy, or do you wait until your new home is secured and then list your previous home for sale?
Both options are important to analyze because owning two homes at the same time has expensive risks. Depending on the situation behind the scenes and how quickly the transition happens, either answer may be best. To know which option to follow, it’s important to weigh a few considerations.
In this article, we’ll look at some of the advantages and disadvantages of buying or selling first. After reading, you should have a good idea which to follow before you begin your home search.
The Pros of Selling Your Real Estate First
Selling first is typically the most practical and often recommended by realtors. Here’s why.
You Take Advantage of a Seller’s Market
In times of a seller’s market, your realtor can get top dollar for your home, and this puts more new homes within reach. You can also better navigate financial surprises that pop up later on in the course of buying.
You Know Your Budget
Whether you get top dollar or your selling price is lower than expected, you have money on hand and a clear understanding of what you can afford. If the price is low, you budget accordingly to avoid overextending yourself. If your home sells well, you can choose to buy a better quality home, or you could opt to roll the profits into savings and buy a similar or lower-priced home. The choice is yours.
No Staging Needed
Since you are still living in your old home, your furniture is there, reducing and even eliminating the need for home staging. If you have ever staged a house or condo, you know it costs more than you initially think, and you are charged for the staged furniture each month until the home sells, which adds up over time. Showcasing your home with your personal furniture gives shoppers the best look at how your home functions and costs you nothing.
You Stay Competitive
Having money on hand from a recent home sale keeps you in the game when bidding on new properties. If you make offers on new houses or condos contingent on your home selling, the owner of the new home will be more likely to choose another buyer rather than deal with the risk.
The Cons of Selling Your Real Estate First
Though the list of benefits is long, it’s important to understand the other side of the coin…
Jumping the Gun on a New Real Estate Purchase
When you sell first, the best way to benefit financially will be to move into a new home around the time the buyers take possession of your home – typically during the 45-day closing window. If you don’t, and if no special arrangements are made with the new buyer or seller, you will need to store your furniture and maintain a temporary rental, which is not always easy. You could find yourself in a hotel for months, which is both inconvenient and expensive.
These financial factors will put the heat on you to find a home quickly. Unless you have a house or condo lined up, you could make poor buying decisions or make sacrifices on home features or locations you later wish you hadn’t.
Tip: To guard against these issues, you could request a “leaseback,” in which the buyer leases the home back to you until you are ready to move into the new house.
The Pros of Buying a House for Sale First
Buying a home first may be a good option for you in certain cases. Let’s take a look at some of the benefits.
No-Risk in Moving Costs
If you buy a home first, you only incur one moving expense from the old home to the new one. Alternatively, if you sell before you buy, you could face a need to move to a temporary location and then move again into the new home when that home is secured. Depending on the amount of furniture you have and the quality of moving you require, moving can run into the multiples of thousands of dollars for each location.
You Can Move at Your Own Speed
You have the option of taking your time to shop, buy, and move when you want, rather than be forced out of your old home too quickly. You have the freedom to move to your new home when it feels right and sell your old home whenever you are ready.
Sure, the sooner you sell after you buy, the more you benefit financially, but if you decided to sell first and face renting a new place and double your moving expenses, you could be better off paying both mortgages by buying first.
You Land a Home You Love
Unless you are facing a job move, choosing to buy first means you have plenty of time to find the home you love. Your current home works as a comfortable base to shop for your next dream home. Homes are often the largest purchase decisions people make in their lifetime, so landing that perfect home for sale will bring a lifetime of joy. As you shop, you have a comfortable place to live and make the right decisions.
Freedom to Experience the Neighborhood
One idea that more people are trying each year is to rent in the area of town where you intend to buy. This means you can hold onto your current home, lease it out, and then rent in the area of the city you want.
If you want to live downtown, in a rural area, or other location that might be drastically different from your current one, you may discover you don’t like the area as much as you thought. Alternatively, you may gain further peace of mind that you are making the right decision. If you love it and your favorite home design hits the market, you can buy it and sell your property when the time is right.
If you are interested in renting or leasing in the Austin area, we offer a wide range of leases and rentals throughout Austin, and can we can even list your home for rent or lease to help you in your Austin home search.
The Cons of Buying a House for Sale First
When you buy first, it’s important to keep some things in mind to stay profitable.
You Could End Up Upside Down Financially
Just like when buying homes for sale, selling a home can take longer than expected, which can add up to multiple payments for two properties. But even though selling and buying both have this risk, you have bigger issues when buying first.
If you buy a home first, your previous home could sell for less than you hoped, which can directly affect what you can afford, leading to an unhealthy amount of buyer’s remorse. And without money from the previous sale, you are fronting money for a new down payment, moving expenses, and repairs. To help against these issues, you can purchase a “bridge loan” or a home equity line of credit (HELOC) to financially navigate your new purchase until the old home is sold, but you won’t benefit if your old home sells too low.
When reviewing the risks and benefits above, the most important factor is financial. If you must leave for a new job, then you will need to buy the new home and sell the prior home fast, in which case one choice is not better than the other. It’s just about working to minimize the time you float both mortgages.
If there isn’t a job waiting for you in another town, then the most common answer is to sell first. You get a realistic reading of what you can afford and the needed funds to assist with buying, moving, and even renting until you land the home of your dreams.
That said, if you find your ideal home before you sell, you still have options to obtain funds until your prior home sells. You’ll just need to be realistic about the financial risks since the sale is still pending.
If you plan to buy or sell your home, it helps to enlist a realtor to keep all financial factors top of mind. Here in Austin, we maintain a list of talented real estate agents who can help you make intelligent financial decisions while providing you with helpful guides when beginning your next move. We also keep an updated list of properties to help with your Austin home search. Contact us to find out what we can do for you.