You may think that selling first is the only correct answer. Believe it or not, you can make a compelling case for either course of action:
- Selling before you buy eliminates financial risk. When you sell first, you know precisely how much money you have from your sale to put toward your next home. No sleepless nights worrying about how you’ll come up with the cash you need for a down payment on your new home or how much longer you’ll have to make mortgage, property tax, and insurance payments on two houses. Your fiscal future is clear.
- Selling first, however, introduces uncertainties and problems. If you sell first, you may be forced out of your old house before you have somewhere else to go. Where will you live? Where will your kids go to school? Where will you store your grand piano and your bowling ball collection if you’re forced to rent an apartment while looking for another home? Do you really want to move twice? What if you can’t find a home you like as much as the one you just sold? Putting your life on hold indefinitely while searching for a new home is emotionally draining and insomnia producing.
Given a choice between either selling your present house first or buying your next home first, it is strongly recommended that you sell your present house before purchasing a new home. Even in good real estate markets, sales frequently drag on much longer than you expect. Selling in a weak market usually compounds the problem. Homeowners tend to overestimate their house’s resale value and underestimate the length of the selling process — a fiscally deadly one-two punch.