The real estate market is heating up.  Sellers are getting their homes on the market and buyers are out in full force.  There’s always a high level of coordination required in every real estate transaction.  But what if you are both buyer and seller?  What’s the right order of operation?  Buy first?  Or sell first?  Each has its advantages and risks.

Buy First – Sell Second

In this scenario, you sign a contract to purchase a home without your home being sold.

The Advantage

This approach gives the peace of mind of knowing that there’s a suitable new home out there before you go to the trouble of putting your home on the market.  You know exactly where you’re going and what it’s going to cost.  Further, you can take your time setting up the new home before leaving the old one.  Disruption to family routine is minimized.

The Risks

What if your home doesn’t sell quickly?  What’s your temperament and financial capacity to make two mortgage payments?  Will the stress of owning two homes cause you to accept unfavorable price and terms on the sale of the old house?  Also, since you don’t know the final sale price, the amount of equity applied to the new home is uncertain.  Finally, if the equity from your existing home is needed to buy the new one, then you may have to incorporate a home sale contingency.  That puts you in a weak negotiating position relative to other buyers.  It may require overpaying to convince a seller to wait for you to sell your home.

Sell First – Buy Second

In this scenario, you accept an offer for the sale of your home before purchasing a new one.

The Advantage

This approach has several financial advantages.  First, you can rest comfortably in your home and wait for the right offer.  There’s no pressure to make a hasty decision.  Secondly, you’ll know exactly how much equity is available to put down on the new house.  And finally, the risk of making two mortgage payments is minimized.

The Risk

What if you can’t find a good option after you’ve already accepted an offer for the old home?  That forces you to either settle for an undesirable house.  Or, put your things in storage and rent until the right home hits the market.  That’s a very expensive and inconvenient alternative.

It’s complicated, right?  What’s the right approach for you?  The simple answer is that it depends.  Each family, home, and market is different.  The good news is that savvy Realtors know how to navigate these difficult scenarios.  There is never a perfect solution.  But proper planning, intelligent sequencing, creative thinking, good negotiating can get your home sold and having you moving into the new one with minimal expense and inconvenience.