What are the pros and cons of buying a new home before selling the old one?

by Dian Hymer

November 03, 1997

Many homeowners can't afford to seriously shop for a new home until they have found a buyer for their existing home. They simply can't qualify to carry two homes at once. But even if you can qualify to own two houses at once for a short period, is it wise to take this approach?

There are certain advantages to buying first. You know where you'll be living next, when you can take occupancy and how much you'll be paying.

Buying first removes the risk that you'll have to move twice. Many repeat home buyers fear that they'll have to move to an interim rental if they sell first and don't find a replacement home by the time they have to turn their home over to the new buyers.

Also, homeowners who have outgrown their home may find the home easier to sell if they move out before the marketing process begins. Then the property can be staged for sale. It can also reduce stress on families with small children and pets if they're living elsewhere when the house is shown.

All of this takes money, however. This is the biggest drawback of buying a new home before selling the old one. Suppose you close on the new home before you sell the old one. If the market slows, it could take months longer to sell your home than you anticipated it would. The cost of paying double house payments adds up quickly. You may have to reduce the price to stimulate showings. Ultimately you could sell for way less than you hoped you would.

REPEAT-BUYER TIP: Before deciding whether to buy before you sell, find out the current market value of your home. Ask a knowledgeable real estate agent in your area to prepare a comparative market analysis. A local area specialist should be able to give you a good idea what your home is worth in the current market.

Don't make the mistake of pricing your home according to how much your new home will cost. The cost of your new home has no effect on what a buyer will pay for your existing home.

Some homeowners make the mistake of relying on a refinance appraisal that was done years ago. This might not be an accurate measure of the value of your home in today's market. The real estate market is always changing. As it changes, the value of your home changes.

In addition to getting an educated opinion about the market value of your home, find out as much as you can about local market conditions. Is it a buyer's or a seller's market? In a hot seller's market, the chances of a quick sale are much higher than in a soft buyer's market.

Find out if there any problems with your home that could make it difficult to sell. Is it located across the street from a noisy school? Is it next to a busy freeway? Does it lack a garage or a second bath? Is the floor plan awkward?

Assess the risk factor of buying first before you get locked into a purchase agreement. If it's likely that your home will sell quickly, it may be worth the risk of buying before selling. But if the marketability of your home is questionable, consider taking the more conservative route of selling before buying.

THE CLOSING: Don't forget to factor in your tolerance for stress. Owning two homes can cause sleepless nights for those who are prone to worry.

Distributed by Inman News Features