Buy first or sell first?
Ask Phyllis: a blog series of frequently asked real estate questions.
Since there is such a strong sellers’ market in real estate right now my husband and I are thinking it would be a good time to sell our fixer upper home instead of investing in all the repairs and upgrades it needs. But if we sell our house, I am afraid we won’t be able to buy another, again because of the current market. So, do we buy first or sell first? Can we make any contingencies? Above all, what do we do to make sure that we don’t end up with two houses or worse yet no house?
So many of my clients are asking this same question. There are several options:
Selling Subject to Finding a Home of Choice
One option is to sell your home, contingent upon you finding and closing on another. Selling with this contingency will likely reduce your selling price as this uncertainty will certainly eliminate some buyers.
Buying First Without Selling
Let’s assume you find a home you love and want to make an offer. Likely you will be competing with many other buyers. Do you need to sell your home to buy this one? If so, it’s unlikely that a seller will accept your contingent offer when they have so many others to choose from. Now let’s assume your home is already in escrow subject to you finding a home of choice. And your buyer has removed all contingencies. Depending on the seller and his Realtor you may have better luck getting your offer accepted as your offer is stronger with a buyer in place.
Selling with a Rent Back
You could sell your home with the condition that you can rent the home back from the buyer. Typically, the seller pays the buyer’s mortgage payment, and prorated taxes and insurance. Depending on what you negotiate, this might be anywhere from two to six months. This will eliminate some potential buyers, who will want to move in your home upon closing. Also, there is no guarantee that you will find a home to purchase in this time frame.
Bridge loans offer a short-term loan which allows homeowners to purchase their next residence by using the home they currently own as collateral. However, a bridge loan may be more difficult to qualify for.
In summary, your safest option is likely selling subject to finding a home of choice.
Best of luck to you.
Related Post: Coordinating your next move