You are already a homeowner, but you want to upgrade, downgrade, move to a new area or otherwise sell your home and move into a new one. What is the best way to go about completing this process? Should you sell first, then buy? Or, should you buy before selling? Perhaps the best answer is a combination of the two. To that end, here is a look at the pros and cons of each option.
Pros and Cons of Selling First
Selling before you buy a new house has many pros and cons to consider. Perhaps the biggest con is that it puts a lot of stress on you to quickly find a new home. After all, you are probably going to find yourself living in some sort of temporary location, which may not be very pleasant for you. Selling first can also be beneficial because you can use the money from the sell of your old house to pay toward a down payment on your new house.
Depending upon your credit history and your income levels, you may need to sell before you will qualify for a loan for a new house. In this case, you really do not have any other choice but to sell before you buy.
Pros and Cons of Buying First
Just as with selling first, there are pros and cons to consider with buying first. Namely, buying a new house before you sell the old one means that you will be paying on two mortgage loans at the same time. For many homeowners, paying this month per month simply is not possible. From an investment point of view, however, it is not much of an issue because you will gain back your money once you sell the house.
Of course, if you are relocating due to work or some other major life-changing event, you may not have any other option but to buy first. After all, you need to move quickly and to get settled in to your new place. If you have the money to pay on both mortgages at the same time until your previous home is sold, this should not be a major issue.
Selling and Buying at the Same Time
If you want to buy and sell at the same time, you might want to write a contingent contract when buying a home. With a contingent contract, closing on the deal is dependent upon whether or not your previous home is sold. The downside to this option is that you lose some of your negotiating power when you insist upon a contingent contract, which means you may end up paying more for the house or the seller may simply refuse your offer.
Obviously, unless you have a contingent contract, it is highly unlikely that you will sell your old house and buy a new house on exactly the same day. Something has to come first. You can, however, start the process of both at the same time in order to make them both happen as close together as possible. If you time things right, you may be able to buy a new home and sell your old home within a few weeks of one another. In this case, you need to take a close look at your financial situation in order to determine which order makes more sense for you.