Should You Buy Or Sell First?

Should You Buy Or Sell First?

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 for information on market trends and tips on preparing you house to sell.

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