One of the most important decisions to make if you want to
sell your home and buy another home is whether to buy or sell first.
Advantages of Buying First
For several years, housing inventory in our area has been
falling significantly, and many homeowners who would like to buy find there is
little on the market from which to choose. When they do see something they like, they may need to buy it quickly
before someone else does. This often means buying before selling and
temporarily owning two homes. In Montgomery, Bucks, and Chester Counties,
housing inventory fell more than 25% during 2019. In Bucks County, it fell an
astounding 37.5% (statistics from BrightMLS).
When you buy first, you can avoid the need for temporary
housing, which is often necessary when selling first. Another advantage of
buying before selling is that you can move some of your belongings into the new
home so that it’s easier to declutter and stage the house you’re selling. You
can also have work done on the house before moving in, such as painting and new
carpet or flooring. This is also the ideal time for more extensive renovations
on your new home, if needed, like a new bathroom or kitchen updates.
What Finances Have to Do With It
For many, the decision whether to buy or sell first comes
down to finances. Homeowners who have paid off their mortgage and have liquid
assets for a cash sale or at least the down payment and closing costs on a new
home are likely in a position to buy first. Others who still have a mortgage payment may also
be able to buy before selling— if their lender determines they have enough
income to qualify for both mortgages and they have enough cash for at least a
small down payment and closing costs.
But what if you still have a mortgage and insufficient
income to qualify for your current mortgage plus the mortgage on the house you want
to buy? You might still be able to buy first if a family member steps in to provide
the funds for a cash purchase. Otherwise, you’ll probably need to sell first.
When Selling First is Necessary
A common strategy for buyers who need to sell first is to
get their house ready to sell but delay putting it on the market until they
find a house they want to buy. At that point, they list their house and hope to
receive an offer quickly. Once they
accept an offer, they make an offer on the house they like. The offer would have a home-settlement
contingency spelling out what happens if the sale of the house they’re selling falls
though or if that settlement is delayed.
Keep in mind that it can be difficult to coordinate settlement
on the same day for both transactions, so you may need to move into temporary
housing after settlement on the house you’re selling. Because your mortgage is not paid off until that
settlement is complete, settlement on that house has to come first. If you’re able
to settle on both houses the same day, try to schedule settlement early in the
day for the house you’re selling so there is enough time between settlements for
proceeds from the first settlement to be wired to the second.
How to Start
If you’re unsure whether you can buy before selling, start
by talking to a lender to determine if you can qualify for your current
mortgage plus the mortgage on a new home. This is an important first step. It’s
also important to review your finances to establish whether you need the proceeds
from the sale of your home for the down payment and closing costs for your new
purchase. This information will give you a good idea of which options will work
for you, so you can move forward with finding your next home.
If you’re planning to move, contact Annette at (610)
247-7892 or annette@preferredhomes.com
for information on market trends and tips on preparing you house to sell.
#realestate
#housing #SellingFirst #BuyingFirst
Copyright © 2020 by Annette Nelson. All Rights Reserved.