When it comes to buying a home, buyers try to engineer the ultimate balancing act of buying the new one first, THEN putting the current one up on the market before the ink is even dry on the purchase contract.
The object—and expectation—is to find that perfect home, then to put the old one on the market in the hope of selling it in the treasured but increasingly mythical simultaneous closing.
Just playing it out in your mind is exhausting, but making it actually happen is a truly massive undertaking. What would make anyone think that such an effort is worth trying?
Fear! Fear that you might not be able to find the right home after selling your current home. Fear of being homeless. Fear of temporary housing. Fear of the dreaded “double move” (moving from the old home to temporary housing, then again to the new home).
Those fears may be legitimate at some level, but there are even greater causes for concern if you plan to buy before selling. Here are eight of them…
8 Reasons to Sell Your Home Before Buying a New One
1. It’s harder to sell a house than it is to buy one
In the best of real estate markets selling a home is generally harder than buying one. But in the market as it is now, it’s harder still. With the average time to market a home for sale currently at more than nine months trying to sell your old one within the typical 30-60 day escrow period between signing a contract and closing on a new one is close to impossible.
It’s a “buyers market”, meaning that it’s the buyer who controls the deal, and it’s even harder. When you buy a home you’re in the driver’s seat—that’s easy, especially with all of the inventory that’s sitting out there. But when you’re the seller you’re dependent on buyers to make it happen, and you have no control over what they do.
2. Selling a home is always a guessing game
When you put your home up for sale, there’s no telling when it will sell or for exactly how much. Worse, deals have a way of falling through—especially in a buyers market. Until you sell and close on your current home you have no idea how the transaction will play out. Now imagine that the purchase of your new home depends on all of that working out just right!
If you sell before buying you’ll know exactly what you have.
3. Working on two major transactions at once
Selling a house is hard. Buying a house is hard. Doing both at the same time borders on insanity. When ever one transaction depends on another, compromises will have to be made and that will mean more money out of your pocket in both directions.
By working on each as a separate project you’ll be better able to insure that you’ll get the best deal on both.
4. You’re an impaired buyer
More than a few homes have been sitting on the market for many months in part because offers have been made that fell through. The cause behind this is very often buyers who had to sell a home first and that didn’t go as planned. A seller who’s experienced this will be understandably reluctant to accept a contract with a home sale contingency.
If you sell your home before buying, you’ll improve your bargaining position on the next home. This will probably enable you to pay less for a home because an anxious seller will see you as a “good buyer”, as in one with no strings attached.
5. You might become an accidental landlord
The Plan B for the buy-first/sell-later home buyer is usually found in a lease—congratulations, now you’re a landlord. Few people ever want this to happen—far better to sell, get rid of the mortgage payment, collect your money and go onto the next deal. But this is what can happen when you put yourself into a position of having to cut a deal, any deal, in order to make the next purchase.
A new set of problems emerges once you go the rental route: how quickly can you find a tenant, how much will they pay, how long will they stay, and finally, can I sell the home with a tenant in the property? This is not something to be taken lightly.
6. You’re set up for the biggest risk in the transaction
Few people can carry two house payments and most sellers assume they’ll only have to do so for a month or two in the event they can’t sell the property. But what happens if two months turns into six or twelve? Or more? This is no place to be an optimist! If you plan to carry two mortgages, you need to consider the possibility that it will continue for longer than you think. How long can you handle that, and do you even want to?
In addition, in the current mortgage lending environment, few lenders are even willing to give you the chance to try. One of the biggest factors driving foreclosures has been default by owners of multiple-mortgaged properties.
Carrying two mortgaged properties is probably the biggest risk you take on when you try to buy before selling, and it can quickly turn into a financial nightmare of the highest order.
7. You’re not certain how much money you can bring to the closing table
Most people get most of their down payment money from the sale of their previous home. But you never know exactly how much that will be until your home has sold and closed AND the certified check is in your hand. Buy selling first, you’re certain not only of how much you’ll net from the sale of your current home, but also how much you’ll need to come up with if it isn’t enough for what you want to buy.
8. You may be forced to price your home for a quick sale
Picture this—you’ve signed a contract to close on your new home on the 31st of the month. Today is the 5th. Your current home has been on the market for two whole weeks but not a single offer has come in on it, even though it’s priced $10,000 below market. You’re getting nervous. Late in the day, an offer comes in at $20,000 below your asking price; you’d love to tell the people making the offer to take a hike—but you’re stuck. If you refuse the offer you might lose your dream home. If only you had more time…
You could have, but you boxed yourself in when you signed the contract to buy. The people making the offer on your home have options—you don’t. You lose!
With everything considered, maybe that double-move thing isn’t so bad after all…