What to do First, Sell Your House or Buy a New House?
What to do First,
Sell Your House or Buy a New House?
When to Sell Your House
The age-old question that continues to perplex homeowners
To help you make a decision that is best for your family, we will look at analyzing market conditions, the pros and cons if you sell your house first or buy first, and the key elements that you should consider when making the decision.
So let’s get started!
In the best of times, the decision is tough to make, and in the post-Covid-19 world, it has become even more difficult. Although there are many factors that we will discuss in the article, one of the most important things to consider when you sell your house is the current market conditions.
Understanding the Market
The first step is to understand the market and how it affects your ability to sell your house, the buying and selling timeline, and thus your options.
Buyer’s Market
In a Buyer’s Market, there are more homes for sale than there are current buyers, which can cause home prices to decrease. Along with lower prices, the homes are on the market longer.
Seller’s Market
If you happen to be in a seller’s market, then you can sell your house quickly. In a seller’s market, there are a few houses and a greater number of buyers. This means you can quickly sell your home, but it may be more difficult to buy your next home. This may lead to a need to move your furniture and possessions to storage while you live in temporary housing or move in with a friend. It will be easy to sell your home, but buying your dream home can take much longer than expected.
How to Determine the Market You’re In
Every city has its quirks and economic factors that affect the housing market, but all of them will have indicators you can use to identify the market you’re in.
The first indicator is the average number of days for a home to be sold in your price range. This data must be from your neighborhood/city and of similar homes like the one you want to sell. This will tell you approximately how long it will take you to sell your home. For example, if the average number of days on the market is 60 days, buying a home before you sell your home may cause a problem as you will most likely not have your home sold before you need to close on the new home. On the other hand, if the average number of days is 30 or less, you can most likely sell your home and buy a new home without running into a problem.
The second indicator is the number of months of inventory of unsold homes. For example, if your city currently has 600 homes on the market and the average number of homes sold per month is 100, you have 6 months of unsold inventory. An inventory of 6 months is considered a balanced market, while anything lower than 6 months is considered a seller’s market, and anything more than 6 months is considered a buyer’s market. When looking at this indicator, we believe it best to be conservative and allow for market fluctuation so we would revise those numbers and say that anything less than 4 months is a seller’s market and anything more than 8 months is a buyer’s market.
To get statistics on your market, we recommend the National Association of Realtors Monthly Report on Existing Home Sales which can be accessed by clicking here. This report provides some great information, but to get specific information on home sales in your neighborhood, we recommend you contact your local real estate agent. They can provide you with current information and a local perspective of market conditions.
When Should You Sell First?
Selling your house quickly is a straightforward approach. It is financially more predictable as you will know exactly how much money you will receive from the sale of your home, and thus, able to accurately budget for your new home. Unfortunately, although this reduces your financial risk, you have increased the emotional and hardship risks.
In a buyer’s market, it may be better to sell first before buying. Otherwise, you run the risk of buying your new home well before your old home is sold. You could be stuck making two mortgage payments every month until your old home finally sells. Not a situation most families can afford.
If you must sell your home to qualify for a mortgage or make a down payment on your new home, then you may need to sell your home first, even in a seller’s market. This is because buying will also be more difficult if not impossible. Plus, with the home sold, your offer to buy a home will be more attractive to sellers because it will not be contingent on the sale of your existing home.
Let us dive into the advantages and disadvantages of selling your house first and figure out when it is ideal to sell before buying.
Advantages of Selling First
There are many advantages to selling first; let’s consider why selling your house quickly may prove beneficial.
- Ability to buy with a budget – Selling first lets you solidify your budget for the new house.
- Finances become easy to manage – The cash from the sale of your home can be used to pay off which will improve your credit scores and provide the down payment for your new home.
- Market risk – The market is always changing, and when you sell first, you know exactly how much cash you have, avoiding the risk of a downturn.
Disadvantages of Selling First
There are potential drawbacks of selling first, and here are a few of them.
- Move twice – You will have to move twice and store your furniture.
- Homeless – You may need to live in temporary housing or with a friend for an unknown amount of time.
- Market risk – The market can be unpredictable. If it becomes a seller’s market, you may have sold for less than what you could have and have to pay more for the new home.
When Should You Buy Before Selling?
In certain cases, buying a house may prove to be better than selling first. Let’s look at a few of those situations where it makes sense to buy a new home before selling your existing home. If you have found a home that is perfect for your family, it may be worth the risk.
– If the seller is very motivated and you are getting a great deal on the house, the financial benefit of buying the house may outweigh the potential risk of being able to sell your home.
– In a seller’s market, if your home is priced right, it will most likely sell in a few days.
– If you have the financial ability to buy a new home without selling the old home, and doing so does not pose a potential financial risk.
– If you plan on keeping your old home as a rental property and can obtain financing to buy the new home without selling the old home.
Advantages of Buying First
There are many advantages to buying first, and here are just a few of them.
- Perfect Home – Finding that perfect home is difficult, giving it up might be harder.
- Move Once – When you buy first, you know you will not have to move twice saving you time, money, and hassle.
- Price Protection – In a seller’s market, price movements can be swift and unpredictable. When you buy first, you have locked in your cost for your new home and can then concentrate on selling your existing home for top dollar.
- Rate Lock – If mortgage interest rates are low, you can lock in the low rate saving you thousands of dollars over the life of the loan.
Disadvantages of Buying First
Buying first has its risk, and it is important to look into those as well. These risks include:
- Life Changes – You will be vulnerable to sudden life changes, like illness or other tragedies that can force you to deal with two houses and two mortgages when you need to concentrate on your health or the wellbeing of a loved one.
- Financial Burden – If your current home does not sell promptly, you will have the burden of paying two mortgages. Over time, this can have a devastating effect on your finances.
- Lower Price – Faced with the pressure to sell, you may accept a much lower sales price than you would under normal conditions.
- Market Shift – As we have recently witnessed with the arrival of Covid-19, market changes can happen almost overnight leaving you unable to sell your home for an extended period of time.
Solution to Consider
Selling your home and getting ready to move is hard enough, but timing the sale of the old home to the exact day you buy the new home is a magic trick many families find difficult, if not impossible.
For most home sellers who are also buying a new home, the thing they worry about most is selling their home before they buy the new home. If their old home is not sold first, then they may not have the money to buy the new home, or they run the risk of having to pay two mortgage payments every month—which could be financially disastrous. But there is a solution you should consider that eliminates that risk – a sale with a leaseback.
The sale with leaseback resolves this dilemma by allowing you to sell your home first and then leasing it back until you have found a new home. With a leaseback, you avoid the double move and having to live in temporary housing for weeks or months.
As part of the sale-leaseback agreement, you will pay rent to the new owners of your home, but it is almost always less expensive than staying at a hotel. The same goes for moving your furniture and possessions twice. Most people would agree that avoiding the hassle of moving twice and not having to live in a hotel for 3 weeks is almost priceless.
What is the Right Decision for You?
There are many advantages, disadvantages, and things to consider when you’re trying to sell one home and simultaneously buy another home. Although every situation is different, if you take into consideration the current market conditions and your particular financial situation, we believe you now have the tools to make an informed decision on whether to buy or sell first.
The Hassle-Free Way!
The Sale with Leaseback Program Offered by OutFactors
At OutFactors, we offer many “Buy My House” programs, including a buy my house with a leaseback program. Our buy my house with a leaseback program is unique because it can be tailored to meet the needs of the seller. We offer a short or long-term leaseback and when permitted by law, we even offer the seller an option to buy my house back from OutFactors.
We invite you to visit OutFactors.com for additional information, and if you are ready to get your fast and free buy my house offer with a leaseback, click here. Getting an offer from OutFactors only takes 2 minutes and personal information is NOT required. Yes, that is correct. No registration, no telephone number, no email address – not even your name. So get your cash offer now!
We hope this article is informative and provides you with another option that you may not have been aware of previously.
OutFactors
539 West Commerce Street
Suite 1205
Dallas, Texas 75208
Contact@OutFactors.com
(800) 420-7030
What to do First, Sell Your House or Buy a New House | Buy My House | OutFactors
