Real Estate Confusion: Should You Buy Or Sell First? by Jeff Adams

The real estate market has improved considerably in 2013 – 2014.  Mortgage rates are still at an all-time low and this has lured many homeowners into selling their existing homes to invest in larger homes available at a lower rate. However, the eternal egg-before-the-chicken conundrum strikes every homeowner at this stage. Should they sell before buying a new home or should they buy and then hope that their old home will sell quickly?

Buying Before Selling

Real estate agents may advise you to buy an affordable property before selling your old one. However, bear in mind that this will mean taking on two mortgages. If you have multiple sources of income, this is completely fine but it may eventually strain your finances.

Investing in two homes can be good idea as this is a buyer’s market. The real estate market has been steadily improving and prices have increased. As large investors have snapped up most properties, good homes are in demand and there is a very good chance that you will get a good rate for your home.

In case the real estate market takes a downturn, you could land with an old home that has devalued considerably and now has a very low asking price. In case, this happens, there is no guarantee that your home will sell and you will be stuck with two homes and two mortgages. You can rent the home and puddle through but this can be very risky.

Selling Before Buying

If you plan to sell before you buy, you are actually making a very smart and cautious decision. You can wait out any interesting buyers and negotiate a good rate on your home. This will definitely result in a higher sale price and you can use this money to invest in a new home.

However, simple problems that crop up are as follows: What will happen if your house sells and you do not find a new home? In this case, you can set up a contingency clause in your contract. In this clause, you are stating that you are selling your home, provided you find a new home to move to within a specified period.

If you do not find a new home, you are not legally obliged to sell your current home. However, this does not mean you can legally keep delaying the sale endlessly. The contingency clause has a limited time and if you do not find a new home, you current sale will fall through and you will lose any money you may have invested.

The Final Choice

In the end, it comes down to your personal decision. If you are confident that your home will sell, go right ahead and invest in a new home. However, if you would like to wait, you can and should do what you think is right for your financial condition. Make sure you carefully consider your income, your financial condition, the sale value of your home and your future financial situation before you choose a route.