When thinking about the future and planning out your move, you’ll probably wonder what step to take first. Should you sell your current place first before looking for a new home, or make the dream purchase first and worry about selling later?
Choosing which route to start with is one of the most important decisions you will make during your moving process. The truth is, it all depends on your specific situation and what type of market (i.e. sellers' or buyers') you are selling in!
When You Should Buy First.
With a sellers' market, hot properties will sell and move fast. So, there is no guarantee that the dream house you are looking at right now, might still be available by the end of the day. The sales-to-listing ratio indicates what’s occurring in terms of supply and demand. In a sellers market, the sales-to-listing ratio is generally at 55% or more with 5 out of 10 houses selling. Another thing to consider, is that mortgage pre-approvals and guaranteed interest rates are only good for so long - the average number of days they will last is about 90. Also, if your future home is a project needing renovations, being able to buy before selling will allow you to work on the project while still being able to stay in the comfort of your own home.
When You Should Sell First.
It is very common to see people take the approach of selling first, then buying second - because this way they know exactly how much money they can spend. This entails that you won’t have to guess or worry about how much money you can spend on your new home. In a buyers market, fewer than 35% of new listings sell - less than 3 out of 10. Selling first also helps avoid the nightmare scenario where people could potentially have two properties because their old one is not selling as fast as they thought it would. A situation like this could lead to potential financial problems of having to either carry the burden of paying for two properties until the old one finally sells, or not being able to close on the new property because you couldn’t secure the mortgage. Selling first helps you avoid that scenario while also giving you the opportunity to shop for your new home more comfortably, making the process less stressful.
So, what do I do?
The direction you take is subjective to your specific needs based on what you are looking for and what position you are in. If you are selling in a market that isn’t as busy as the one you are trying to buy into, then selling first is likely the better option. But, if the market you are living in is selling quickly, but you are moving to a market that isn’t selling as fast, then buying first will be in your best interest. If your main concern is maximizing the sale of your current property, then its best for you to sell first. If you are focused on securing your new dream home as quickly as possible, then buying should be your first move.
It all depends on your current situation and what markets you are in and looking at, but this guidance should make it easier for you going forward!