Before you start seriously searching for a new home, or move to put your current home on the market, you might ask: Should I try to buy first, then sell, or vice versa? Good question. Both options have risks and rewards.
While selling the current house before buying a new one is usually the more practical solution, it’s not always convenient. It likely means having to store your stuff while home shopping. Temporary housing will be necessary.
But selling first also gives you the luxury of time. You can wait until you get an offer you are satisfied with, rather than feeling pressure to get as much as you can to put toward a new house you already bought - or are in the process of buying.
By selling first, you have ready access to actual cash to apply to your next purchase. When you know your profit, you can adjust your affordability and shop within budget. Sellers like buyers who know exactly where the down payment is coming from.
However, if you have the financial security to own two homes at once, then buying first might be a good choice. You avoid the hassle of having to leave the house every time someone wants a tour. Instead of trying to keep your home show-ready while still living in it, you can move out first, and have someone stage and decorate it.
When you buy first, there is no storage, no storage fees, and no multiple moves. You avoid the stress of trying to perfectly align the purchase and sale and instead give yourself enough time to organize, pack and move.
There is one ironic little problem: The same competitive market. If your bid is contingent on the sale of your current home, it could be harder to get sellers to take you seriously: You could be carrying two mortgages for an extended time.
If you decide to buy first, there is the “contract contingency,” where a buyer requests the purchase be dependent on the successful sale of their current home.
Another “buy-first” option is a bridge loan, a way to finance paying two mortgages at once. It functions as a short-term loan to be repaid on the sale of your original house.
Whichever choice you make, do not let emotions dictate unacceptable compromises. Whether you plan to buy before your home closes or during your stay in gap housing, you can feel pressured to make your next home purchase.
Buyers should never feel pressured by time constraints. Planning for a reliable short-term rental is a good solution to these issues.