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Deciding whether to buy or sell first is rarely easy. There are pros and cons to each strategy. If you buy a new home first, you'll eliminate the anxiety about where you'll live next. The worry is how long it will take your current home to sell. Owning two homes can be costly.
Selling first relieves you of the financial burden of owning two homes. The challenge then becomes finding a new home within a given time frame. If you can't find a replacement home in time, moving to an interim rental may be the only option.
The realities of your financial situation will determine whether you can buy first, or must sell first. If you have enough in savings to cover a down payment and closing costs on a new home, ask a mortgage person if you qualify for the financing you'll need without having your home sold.
If you don't have enough cash to make the move, ask your mortgage person if you can borrow enough cash for a down payment and closing costs and still qualify for the financing you need to make the purchase. Some homeowners use an equity loan on their current home to generate the cash they need.
Many buyers can't qualify for the mortgage they need to buy a new home without having their current home sold. In this case, market conditions will determine whether you can buy, or must sell, first.
HOUSE HUNTING TIP:
Talk with a real estate agent (or agents, if you're buying and selling in different locations) to find out how market conditions will affect your decision. Ask your agent, or agents, the following questions. Find out approximately how long it will take to sell your current home. Are home like yours selling quickly? Or, is there a lot of competition for your home currently on the market?
Are conditions such that you can sell you home with a contingency to find a replacement home? Buyers usually won't accept such a contingency unless the inventory of homes for sale is very low. Given a choice, buyers will choose a home that is definitely for sale, and not encumbered with a contingency for the seller to find a replacement home.
If this contingency isn't a viable option, find out if you can sell with an option to rent back your home from the buyers for a period of time after closing. This will give you additional time to find a home to buy if you haven't found one by closing.
On the buying side, you'll want to know approximately how long it will take to find a home to buy. Is there a lot of inventory on the market, or are listings scarce? Are listings selling with multiple offers, or can you take your pick? Can you buy a home contingent upon the sale of your home? If not, is it possible to buy contingent on closing the sale once you have an accepted offer for the purchase of your home.
Even though you'd rather not move to an interim rental, find out how much it would cost if you had to go this route. Are there plenty of homes for rent in the area where you want to live? Also check into the cost of storage in case you need to store some of your possessions temporarily.
THE CLOSING:
Carefully consider your tolerance for risk and uncertainty. If you buy first and your current home doesn't sell quickly, can you afford—financially and emotionally—to own two homes for longer than a few months?
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