Should I Find a New Home Before or After Selling My Current Home?
Should I Find a New Home Before or After Selling My Current Home?
The real estate conundrum that plagues many a homeowner is the ever-present question: "Should I buy a new home before selling my current one?" The answer, as with many real estate queries, is not black and white—it's an intricate dance of financial considerations, market conditions, and personal circumstances. Let's unpack your options:
1. Buy First, Then Sell: A Convenient One-Time Move
If your financial position is robust enough to carry the weight of two mortgages simultaneously, this strategy promises unparalleled convenience. Here's the allure:
Seamless Transition: Purchase your new haven, orchestrate your move, and only then put your current home on the market. This eliminates the juggling act of syncing closing dates or the stress of not knowing where you'll reside next.
2. Sell First, Buy Later: Financial Prudence
However, if you're reliant on the equity from your existing home to fund your next purchase, this method shines:
Cash in Hand: Once your home sells, you'll have a clear picture of your financial standing—how much equity you can extract and what budget you can allocate for your subsequent purchase.
Temporary Residencies: A short hiatus between homes might necessitate a pit stop. Consider short-term leases, Airbnb lodgings, or even bunking with relatives for a span.
3. The Bridge Loan & HELOC Dilemma
For those in-betweeners who abhor the idea of temporary housing, there are financial instruments like bridge loans or Home Equity Lines of Credit (HELOC) to consider:
Bridge Loans: These short-term loans are designed to bridge the gap between the sale of your current home and the purchase of your new one. They can be used for down payments but come with interest costs and are tethered to your debt-to-income ratio.
HELOC: By leveraging the equity in your current home, a HELOC can grant you a credit line for your next home's down payment. However, tread with caution. The volatile nature of HELOCs means lenders can demand repayment suddenly. Post the 2008 housing debacle, a staggering 47% of all HELOCs fell into delinquency. With your home as collateral, any market downturn could push you into the quagmire of foreclosure.
4. The Home Sale Contingency Card
Yet another avenue available is purchasing with a home sale contingency:
The Mechanics: On finding your dream dwelling, your offer is conditioned on the sale of your current home. Typically, there's an expectation to list your home swiftly—often within a five-day window post the seller's nod.
The Risks: Such conditional offers tread on shaky ground. Your coveted home isn't technically 'pending' and remains fair game in the market. If another buyer, free of sale contingencies, swoops in, your offer can be "bumped". You'd then face a gut-wrenching decision: buy without having sold or watch your dream home slip through your fingers. And if the latter isn't painful enough, there's the potential forfeiture of your earnest deposit, which can be a hefty sum.
Wrapping Up
Each route bears its own set of merits and challenges. The paramount decision hinges on your financial comfort, market savviness, and risk appetite. Remember, in the world of real estate, guidance is invaluable. Should you stand at this crossroads, considering a move, reach out to our seasoned team. Our mission is to navigate you seamlessly through such pivotal decisions, safeguarding your interests at every juncture.