Sell my Current home First or Buy a New Home First?
Dear Ritu, We are thinking about moving up into a single family home and sell our town home in Northern Virginia
We do have some equity that will be used to purchase our new home. We
are confused on whether we should purchase first or sell our home first.
Can you please advice.
Answer: It is great you have equity in your home! My recommendation to
my home seller/buyer is since you don't know how much you are going to
end up getting on your town home or the home you are going to sell it is
wise to first sell your home. However the question comes up is what
happens if we sell but cannot find another home to purchase.
OR buyer of our home walks out of the contract.
Here is what the steps I have recommended to my Virginia clients:
Check out the inventory of
the current homes that is active in the market for the style of homes in
the area you are considering to purchase. This will help you understand
and narrow your home purchase.
Work with a Realtor to
understand the current market for your home you own. What are the
current comps, average sales price, days on the market & percentage
of active versus sales?
List your home with a contingency called "HOME OF CHOICE"
. This will give you a time frame once buyer submits an offer to go out and purchase/contract on your next home.
On your to be home you can purchase with a contingency of "COINCIDING SETTLEMENT"
which means for any reason your buyer of current home walk out or defaults you can void the contract.
Work very closely with your Realtor® to keep up with what is going on with both your buy and sell side.
Things to keep in mind:
You may lose a bit of
leverage on both the ends since you have contingencies (a) of finding a
new home (b) Coinciding settlement.
It may limit your number of
choices in the market place for your new home since Short sale and
Foreclosure homes are not going to accept homes with contingencies.
Keep the time frame shorter the better to wrap up the deal.
What is your other option?
If you do not want to keep contingencies your other option would be
Sell your home first and rent back. However lenders are restrictive on
the time frame the buyer will be able to rent you back. The rent is
calculated according to your buyer's monthly mortgage (PITI+HOA) which
may be significantly higher than your current monthly mortgage. In the
event you don't find a home of choice prior to rent back you may have to
go for double move. Last thing, your buyer may want to move in before
their lease expires and may not want to be a landlord.
This is still doable but you have to keep an open stream of communication with your Realtor.