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Should I Sell Before Buying A New Home?

Michael Christie

Michael has had the pleasure of calling Guelph home his entire life...

Michael has had the pleasure of calling Guelph home his entire life...

Feb 22 6 minutes read

You want to buy your dream home! That is very exciting and you should be thrilled for the upcoming process.

But wait a second. You currently own a house and will need to use some or all of the proceeds from the sale as a down payment on your dream home. Plus, you probably want to have a loan for a primary residence, not a loan for a second home or investment property. 

So you need to sell your home before buying a new one and you might not want a period of homelessness in between ownership of each property. Guess what, there doesn't have to be a gap. OK, this sounds daunting, but done correctly, this process does not have to be a cause of stress. 

There are some more complicated methods of handling sale/purchases that involve lease backs or renting a property before moving but for the sake of brevity, I am going to stick to the basics. 

There are 3 basic ways to structure a sale/purchase:
1) Sell your current house and then look for a new one
2) Find your dream home and then start marketing to sell your current home
3) Get your home ready to sell then start looking for your new one

Let's take an in-depth look at all three:

1) Sell your current house and then look for a new one:

As basic as it gets. Market your home, put it under contract, successfully sell it, and then once the proceeds are in your bank account, go find your dream home. A lot of folks think that this option is their only option. Luckily that is not the case. This is, however, the most stress-free option because there are less moving parts. Limiting moving parts and possible problems is sometimes a luxury that we do not have. Don't forget that this option comes with a gap of at least a month where you have already sold and moved out and you still haven't chosen a new house. For time frames in the home buying process give us a call!

Before moving on to the next 2 options it might be helpful to know that there is quite a bit that goes into the buying process and escrows typically last 30 to 45 days. Some buyers will include conditions such as financing, home inspection, or insurance. For the next 2 options for a sale/purchase, you will add a fourth condition where the Agreement and Purchase and Sale is subject to the sale of the Buyer's residence. 

2) Find your dream home and then start marketing to sell your current home:

There is work to be done if you are about to begin marketing your home. Do not neglect the pre-listing process that will result in selling for more money and in less time. Even though you already completed prepping for the market you may be hesitant to officially put your house on the market until you are under contract on your future home.  This is a perfectly natural feeling and you are not alone. If this is how you feel you will submit an offer on your dream house that is subject to the sale of your current house in a reasonable amount of time.

Now your offer is accepted. Awesome. It is crucial to sell your house ASAP. Make sure that your agent has a proven track record of outpacing the market and a system to get that done consistently.

Next, your current home will go under contract and you will design the dates to be a simultaneous close. Well, this typically staggers a day, but we plan for that.  It works out beautifully if you have a couple days of having possession of both homes. Much easier to coordinate your move in such a great situation. 

3) Get your home ready to sell then start looking for your new one

This is very similar to option 2. The only difference is that your house is already on the market in option 2, or more ideally, already under contract when you submit your offer on your dream home. 

You absolutely can and should tour homes before your house goes under contract. You should know the market and what is out there. The pros and cons of option 2 and option 3 have everything to do with market conditions (Buyer's market or a Seller's market).

In a Seller's market, where there are more Buyers than Sellers, you are competing against many other Buyers. Some houses, even in extreme Seller's markets, don't sell in multiple offer scenarios. However, Sellers know it is a strong market and hesitate to take what they may view as a "crappy offer." Presenting your offer as a strong offer that will easily close is crucial. Presenting an offer that has a whole bunch of moving parts, especially in a multiple offer situation, forget about it, you are very unlikely to win. 

In a Buyer's market, it could be rather easy to convince a Seller to accept your offer. Talk to your Realtor.

All of the sale/purchase options are good options that work for different folks in different circumstances. In all options, it is important to execute the process as effectively as possible on both the sale and the purchase. Your Buyer's actions can and will have a domino effect on your purchase. 

Make sure that your agent has a process in place to help you and that the agent has a proven track record.

Buying or Selling?

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