To Buy First or Sell First—That is The Question

                                                                                         

The classic dilemma for homeowners is whether it's best to buy their next home before or after selling their current one. Making the wrong decision can have tremendously serious ramifications, worst case scenarios being financial strain or temporary homelessness. Don't allow anyone to rush you into this decision because both options have their risks and advantages.

When debating whether to buy first or sell first, the first thing you need to find out is whether your area is in a buyers' or sellers' market. If there is a surge in home sales, with rising home prices and quick closings, you're in a sellers' market. With properties being bought and sold quickly, it's wise to buy a new home before selling your old one. Keep in mind however, that you'll only be able to do this successfully if you have enough money in the bank to carry two mortgages.

If you decide that you want to buy first, the smart thing to do is add a contingency to your purchase offer, stating that your purchase of the new property must wait until you've sold your current one. In a sellers' market though, sellers don't have to accept purchase offers that include contingencies because they know that there'll be buyers knocking on their door, ready to offer the full asking price with no questions asked. If you try to make an offer contingent on the sale of your current home, you risk losing the deal. Without this contingency however, you'll have to buy the new home right away and pray that someone buys your house quickly. Otherwise you'll end up paying for both mortgages.

When paying for two houses, you're much more likely to accept a low-ball offer on your house. If buyers know that you're desperate to sell, they'll take advantage by offering you less than the house deserves. This will result in a loss that could affect your ability to finance your new home.

Buying first can lead to a slew of headaches for you, so in general, experts recommend that homeowners sell their homes before buying another one. Selling first gives you the peace of mind that comes with knowing exactly how much money you have available for your new home. There's no guess work, and you won't have to pay two mortgages. Selling first also means that you'll be able to use equity from your home's sale to put towards the purchase of your new property—there are no financial what-ifs.

Selling first reduces your stress and allows you to be more selective in terms of accepting an offer on your home. You won't have the deadlines or financial strains that you would have if you opted to buy first. You'll be free and clear to buy the home of your dreams.

On the down side, selling first requires you and your family to find temporary accommodations while you house hunt. Some may find it hard to find a place to stay that is safe, clean, affordable, and located close to work and school. In addition, you won't be able to unpack, and will have to keep the majority of your belongings in storage. This kind of upheaval can be very stressful, and may prompt you to rush into buying the first reasonable property you find. Your desperation for permanent quarters could prompt you to buy something you otherwise wouldn't.

Whether you decide to buy first or sell first, you're going to face some stress. But if you do your research and plan well in advance by arranging your temporary housing beforehand, you can save yourself a lot of hassle by selling your home before buying a new one. It isn't a perfect solution, but unless it's a red hot sellers' market, it's the most prudent way to go.

About the author:
Complete Calgary real estate search: View all condos in Calgary including Market Stats for Calgary houses. Access photos, virtual tours, neighbourhood info, maps and more at JustinHavre.com.

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