Should you buy first or sell first? Either way can be risky if you don't know what you're doing. You want to avoid three things:
- 1) Losing the home you really want
- 2) Getting stuck with two homes and
- 3) Ending up homeless.
It depends on your situation. We're going to talk about two different scenarios today. One is a seller that does not have to sell their current home before purchasing another home, and two is a seller that wants to or is required by a lender to sell their current home before purchasing another home.
First we're going to talk about the seller that does not have to sell before buying. This person or this buyer is in a really, really good situation. You are in total control. You can basically do whatever you want to do. Generally the problem is not with this group of people. Typically the problem lies in the group of people that have to sell their home first in order to buy another home. For this group here, you can find a home, you can buy it, and then determine what to do with your current home at that time. Again, you're in total control.
I would recommend asking for a closing date 90 days from now if you don't want to own two homes at the same time. This will give you time to get your home listed and possibly sold before closing on your new home. Sometimes people can afford to purchase another home without selling their home, but they may say, "Hey, even though we can afford this, we really don't want to be in a situation where we have two house payments if the house that they're selling is not paid off." Again, we would recommend write a contract on the home that you want to buy putting closing date 90 days from now. That will give us 60 days to get your home sold. Generally it takes about 30 to 45 days to get a property closed, so that gives us 45 to 60 days to get your home sold. Then once we get an accepted offer it'll be another 30 to 45 days, which will be a total of 90 days
The other reason to put down a 90 day closing date is if you are not in a hurry to move and your home shows well. In this situation, list your home right away and delay packing as long as you can, because the home will show better with your furnishings in it. If your home sells within the first 60 days, you could close on your current home and your new home on the same day. It would be best to ask for a 30 day closing date and move before putting your home on the market if your home does not show well. Maybe you've outgrown your home. Maybe it's cluttered.
We recently had a transaction with a friend of mine. They purchased another home. They moved out. They then went back to the home that were selling and they made some improvements. They painted. They carpeted. They did all those things. They even had a stager come in and stage the home. The home showed really, really well. For them that was the right decision because we ended up selling the home fairly quickly for full price. For them it was the right decision because if they would not have moved out first, the home would not have shown well and would've sold for substantially less money.
The other reason is if you don't want to live in your home when it's for sale. We would recommend get an accepted on the home that you want to buy, move into that home, then put your home for sale. There are a lot of inconveniences when you have your home for sale. You can’t live like you normally do. Sellers should not be home for showings. You always have to keep your home show-ready. There are some advantages of moving out before putting your home on the market.
Now let's talk about the seller that wants to or has to sell before purchasing another home. This is very important. Step one is get your home on the market. That's always step one if you need to your current home before buying another home. The only time I would say don't put your home on the market first is if you're undecided: "Well, you know, gosh, we would move if we found the right home, but we're just not sure," or, "We want to just go out and look and see what we could buy for the amount of money that we want to spend to see if there's anything out there that would be worth it to us to buy and then sell our home." If you're not 100% committed to moving, then maybe you do want to go look at some homes first before putting your home on the market, but if you know you're going to make a move, get your home on the market first.
Many clients want to find a home before selling their home. Again, if you're committed to moving, that is the wrong decision. Get your home on the market first. Very, very important. Finding a home and then trying to get yours sold, that's backwards and it rarely works. Get your home on the market. Then as soon as you list your home we would recommend that you start looking for another home. You don't have to wait until you get an accepted offer on your home. Start looking right away.
Some sellers say to us, "Yeah, but why can't we just go out, find a home, get an accepted offer on it, and then put ours on the market and our offer will be subject to our home selling?" That sounds good, but unfortunately that rarely works. A subject to sell offer does not do much for you. If you write an offer subject to your home selling, all that does is put you first in line. The seller of the home that you want will continue to try to sell that home. Then if they get another offer on that home their only obligation to you is to come back to you and say, "Hey, buyer number one, we did get an offer from buyer number two, so you either have to 1) buy our home even though yours has still not sold, or 2) you have to step out of the way and let buyer number two buy the home."
A seller can accept your offer subject to your home selling, but all that does is put you first in line. If you then say, "Well, we cannot buy a home until ours sells," then you just lost that home because they're going to sell it to buyer number two. Some sellers will not even accept a subject to sell offer. If a seller accepts a subject to sell offer, they have to disclose that to every Realtor and buyer that look at the home from that point forward. Sometimes in those situations Realtors may not want to show that home or buyers may not want to look at that home once a seller has a subject to sell offer. The reason is a buyer doesn't want to take a chance of going into a home, falling in love with it, and then not being able to buy it because buyer number one may buy it. Sometimes a seller will not accept a subject to sell offer for that reason. They're concerned that the number of showings could go down.
If you are writing a subject to sell offer, you put yourself in a weaker negotiating position. You don't have much negotiation power if you're saying, "Hey, we want to buy your home if ours sells." It puts you in a very weak negotiating position. You're probably going to end up paying more for the house.
Many sellers are afraid of selling and not being able to find a home to buy. A lot of times sellers say to us, "Well, yeah, but I don't want to put my home on the market first because what if we get an accepted offer and we haven't found a place to go yet? We're going to be homeless." In that situation, what we would recommend is that you accept an offer and just put on the offer that you will not close for 90 days or 30 days from the date that you get an accepted offer on a home that you want to purchase.
Full disclosure: If you put a closing date 90 days out and you still have not found a home and are not able to close in that 90-day time frame, you do still have to move out of your home, or you have to go back to the buyer and say, "Hey, we're really having trouble finding a home that we want. Is there any way you would give us a 30- or 60-day extension?" Quite honestly, most buyers are going to say no. Most buyers are willing to wait 90 days, but most are not willing to wait more than 90 days.
If you say, "Okay, well, I'm not going to listen to you. I'm still going to find a home, write a subject to sell offer, and then put my home on the market," in that situation, if you choose to do that, you must have your home ready to go on the market right away after you get an accepted offer on the home that you want to purchase, because per our contracts your home must be listed within a couple days from the time you get an accepted offer on the home that you want to purchase. If you choose to go that route, it's very, very important that you're getting your home ready to sell so it's ready to go right away if you get an accepted offer on the home you want to purchase.