Buy My Next Home Now Or Sell My Current Home First?
Deciding whether you should buy a new house and then sell your current home or list your existing home first and then find a new home can feel a bit like the chicken and the egg conundrum. There are certainly pros and cons to both approaches, and we’re here to help you figure out which option is best for you.
Regardless of which option you choose, you want to avoid:
- Losing the home you wish to purchase
- Getting stuck with two homes and two mortgages
- Ending up homeless
There are two options: buy your next home before selling your current home or sell your existing home and buy your next home at the same time.
If you have a mortgage on your current home or will need one to buy your next home, the first step is to talk to a mortgage lender to find out what your options are.
Buy your next home and then sell your current home
The option to buy your next home before selling your existing property is a luxury for most homeowners. If you own your home outright, or you have enough expendable income that paying two house payments at the same time isn’t going to be a struggle, delaying the sale of your home can make for a much more relaxed transition.
Here are a few of the benefits:
- Knowing you can take your time to find a home and not feel rushed
- Move in at your own pace.
- You don’t take the risk of losing the home you want because it is not subject to your home selling
- You don’t have to live in your existing house while it’s on the market. It can be challenging to keep the home show ready at all times, especially when you have kids and pets and it can also be inconvenient to leave each time it’s shown.
- Be able to make improvements to the new property before moving in (paint, new flooring, add a fence, etc.).
- Ability to move out and then take the necessary steps to prepare your current home for sale
However, there are some downsides to buying a new property before selling your existing home, especially if you don’t have wiggle room in your budget.
Some of the disadvantages of waiting to list your current home until after you’ve bought a new house include:
- Potentially paying mortgage, taxes, insurance, and utilities for two properties
- Maintaining two homes.
- Possible insurance issues. Many insurance companies will only cover a vacant property for up to six months.
- How to avoid paying two mortgages
Some people are financially capable of purchasing another home before selling their current home but don’t want to get stuck with two payments if they still have a mortgage on their existing home.
If this is you, I would recommend asking for a closing date 90 days from now on the home you are purchasing. This will give you some time to get your current home listed and possibly sold before closing on your new home. A closing date 90 days out will give you 45-60 days to get an accepted offer on your current home and then it generally takes about 30 to 45 days to get a property closed once you receive an offer. From the time you close on your new home, your first payment will not be due for at least 30 days.
I would also recommend asking for a 90-day closing date if you are not in a hurry to move and your home shows well. In this situation, list your home right away and delay packing as long as you can, because the house will show better with your furnishings in it. If your home sells within the first 60 days, you could close on your current home and your new home the same day.
If your home does not show well, it would be best to ask for a 30-day closing date and move before putting your home on the market.
Who should consider buying first, listing second: Individuals or families who don’t have a mortgage on their current home or have enough disposable income to pay two mortgage payments at the same time.
Sell your current home and buy your next home at the same time
Most sellers will fall into this second category and need to proceeds from their existing home to be able to purchase their next home. Some sellers choose this option even if a lender allows them to buy before selling because they have no desire to try and juggle two house payments.
If you’re committed to moving, the first step is to list your home for sale.
Many buyers want to find a home before selling their current home, which is a mistake. You need to get your home on the market first. Finding a home and then trying to get yours sold rarely works and is backward. As soon as you list your home you can start looking for another home. You don't have to wait until you receive an acceptable offer on your home to start looking, but you will need to have an accepted offer before writing an offer on your next home.
The benefits of listing your home first and then purchasing a new house include:
- It’s the safest option financially
- You will know how much your home sold for so you know what proceeds you have to put towards your next home.
- You won’t be forced to accept a lower price to sell your house quickly to avoid two mortgages
- Picture of a paper with home selling costs
Many people fear that they will not be able to find a home they like. In this situation, I recommend negotiating for a 90 day closing on the home you are selling. You will then have 60 days to find a home. If you do not find a home in the 90-day time frame, you still need to move out and find temporary housing.
What about a subject to sale contingency?
Many sellers want to find a home and write an offer subject to their home selling. This can work if the seller accepts your offer and you get your home listed and sold quickly. That sounds good, but unfortunately, it rarely works. If you write an offer subject to your home selling, all that does is put you first in line. The seller of the home that you want to purchase will continue to try to sell that home. If the seller receives another acceptable offer without a subject to sale contingency, their only obligation is to tell you that they received another acceptable offer and you typically have 24 hours to decide on how you want to move forward.
You have two choices:
- Purchase the home even though your current home hasn't sold yet
- If you cannot purchase the home because your home has not sold yet, the seller has the right to accept the other offer, and you lose the house.
If you are writing a subject to sell offer, you put yourself in a weaker negotiating position. You don't have as much negotiating power when it is not a firm offer with a definite closing date. You may end up paying more for the house than if it is not subject to your home selling.
Who should sell first, buy second: Anyone who doesn’t want to pay living expenses for two houses, or anyone who needs the sale from their first home to help fund the purchase of their new property.
Getting the timing right
Yes, there is some juggling required when it comes to closing on the home you are buying and the home you are selling the same day, but we’re here to guide you through this process.