Do You Have to Sell Your Home Before You Can Buy?
Planning to Sell Your Home Before You Buy a New Home
Oftentimes, a homeowner will need to sell their current home before they can buy a new home. Typically, the seller will need the equity from their current home to purchase the next home, or they will have to remove the debt from their current home to be able to afford the debt of the next home. In either case, the home seller will need to make a plan to successfully first sell their home and then purchase a new home. This planning is critical to ensuring that the process moves forward smoothly with few surprises.
Every situation is different and you must consider your specific needs when making a plan to sell your home. Are you moving for schools, extra space, to save money or because you want a change of pace? If you have to sell your home before you can buy a new one, having a game plan will help you with timing, organizing and stress management. Fewer surprises will result in the process being much more ejoyable and productive, which will help because it is never easy to make a such big move.
Consider Your Specific Needs When Making a Plan
Frequently, I see home sellers begin their home search with the hopes of finding a new home first before they prepare their home to sell. Other times, sellers do not have a desirable new home available to them once their home sells. There are dozens of possible scenarios and each has its positives and negatives, so it is important think about what might happen to you in this process and how you will handle it.
Make Your Plans Step-by-Step
The most important first step is to decide to move for the right reasons for you. If you have a new baby and you need another bedroom, that is certainly worth the effort to move into a new home. If you are casually searching for your dream home and want to buy it if you find it, that is a fair reason, but it will potentially cause challenges if you have to sell your home to buy. I do urge caution about ever making a plan to sell your home based upon finding the home that you want to buy before preparing your home to sell. If you are only able to make a contingent offer on a home while you wait for yours to sell, the home that you want may sell to someone else which will leave you in a tough place.
The next step is to develop your ideal timeline and begin to put together your team. If you want to be in a new home in 90 days, many things will have to go right to make that happen. If you can wait 6 months to a year, or more, to purchase, then the urgency is not such a driving force. You will likely need a team of professionals to help you with selling your home and buying a new one. You may want to enlist the help of one or two real estate agents, a mortgage lender, a title company, a home stager, a professional photographer, home inspectors, plus others who will assist and guide you throughout the process.
With your team in place and an ideal timeline set, you can now make your best Plan A, followed by Plans B & C. In most situations, Plan A will go as follows -
- Decide that you need to sell your home.
- If you are going to list your home, consult with a real estate agent about marketing and selling your home.
- Prepare to list your home for sale by staging for photography and showings.
- Begin to define your wants and needs in the new home, and commence a general search for a suitable home. Your agent can help set up searches for you. Be prepared to go see any potential homes as soon as you are able to be competitive in the market. Remember to not get attached to any one home during this step because it may sell prior to you selling yours.
- List your home for sale and continue to search for a new home.
- If you receive an offer on your home, you will need to consider all of the implications of the contract - how long until closing, will inspections effect the process, can you keep temporary possession, etc. Once you accept an offer, you will need a place to go. If you do not have a new home selected, then it is very possible that you will need temporary housing and storage for your personal items. This is a time where you would switch to Plan B, moving into temporary housing and then continuing to search for a suitable home.
- If you have found a suitable home, then begin negotiations to secure the home under contract. Make sure that you are careful with the contractual terms so that you close and take possession of the new home after the closing of your other home. Make certain that the contract is contingent upon the closing of your other home. You may even negotiate to delay inspections on the new home until after the inspections are satisfactorily competed on your original home to possibly save money.
- Follow the contractual terms through both closings and you will have successfully sold your home and bought a new one!
If you must sell your home to buy a new home, then careful planning will help the process go smoothly. A common mistake in many situations is making the decision to move based upon a home that you have found, prior to preparing your home to sell. Entering into a contingent contract without being able to perform gives you little leverage, and putting your home on the market tied to one home is a setup for challenge and disappointment.
Make a Plan A, B and C, and be prepared to move into temporary housing. It could take many months after selling your home to find a new home, and that can be very disruptive to busy lifestyles. Most of all, remain positive and focused throughout the process. There will be many moving parts and your team will be looking to you to confirm that the plans are being executed as you desire. Use the game plan as your reference guide to successfully sell your current home and buy a new one.