Is It Better To Buy Or Sell First?

Should you buy or sell first? The answer to this question depends on a number of variables specific to your situation. Whether you can afford to buy first and can financially manage two concurrent mortgage payments will most likely answer this question for you.

Real estate market conditions also may factor into your decision. Your Realtor is an invaluable source who can tell you approximately how long it may take to sell your current home and provide you with information about homebuyers’ market conditions, the inventory of for-sale homes and estimate how long it may take for you to find and close on your next home. Professional help is particularly useful if you are selling and buying in two different markets. Your Realtor will be able explain and help you with the differing market conditions that could affect the transactions.

Generally, selling first is considered optimal because it frees up your equity and more precisely helps determine how much you can afford to spend on your next home. This tactic also helps relieve some of the stresses associated with the dual transaction.

Many home seller/buyers need the equity that’s tied up in their current home for the purchase of their next home. Once that home is sold, you’ll likely become a powerful homebuyer because the sale may leave you with a substantial down payment and plenty of cash for closing costs. Being in this financial position typically will afford you the most favorable financing terms and a stronger buying position – home sellers prefer serious homebuyers who have proven that they have the funds necessary to close on the home purchase transaction.

Another way to capitalize on your current home’s equity is to take a bridge loan, a short- term loan that bridges the gap between the sale of your current home and the purchase of your new home. The process is straightforward: the mortgage loan you use to purchase a new home will use your old home as collateral. In order to qualify for a bridge loan, you must have an income that can cover the cost of the two simultaneous mortgages. A bridge loan can be a useful tool for buyers who plan on selling but who need financial flexibility in a hot housing market.