Should You Sell Your Home Before You Buy?

There are many reasons you might hesitate to sell your home before you buy a new one.  Maybe you want to cushion your move. You might consider retaining your first asset for rental purposes.  Maybe you want to wait until your local market improves. If you are contemplating the idea of keeping one home while you close on a second, or are burdened with navigating the transition, make sure you take the following into account:

Market Dynamics

Today’s market tends to favor those homebuyers with cash in hand. For many, however, that cash will be generated by the sale of their existing home. Some homebuyers consider using their existing home to obtain a line of equity credit to be used for the down payment of their new house; but this will likely mean two mortgage payments while you wait for the old home to sell. Depending on the location and other homes in the area, that may be a month or more.

Extend Escrow

If you list your home when you start your search for a new one and accept an offer right away, typically there’s a 30-day closing period. If you have not settled on your new abode yet, you can explore extending it to 45 days to give yourself more time. Many buyers are willing to be patient—they are even possibly in the same situation you are. However, remember my first point; you’re selling in a buyer’s market, so some interested parties might not be willing to wait.

Risk Assessment

In the end, this question comes down to which risk frightens you more: selling your home too early and having nowhere to live, or buying too early and being saddled with two mortgage payments if your home doesn’t sell quickly. For most people, it’s the second—and further, retaining your first home may make your offer less attractive to the sellers of your new home, since your ability to buy may be contingent upon the sale of your old home. In the long run, we usually recommend that you sell before you buy, especially if you still owe money on your old mortgage. If you’re lucky enough to own your first home free and clear, the choice is yours!

Written by Adam Funk, Assistant Vice President of Sales at Royal United Mortgage LLC
Published: 12/08/15