The
"For Sale" sign caught Cameron's attention. But it was the
handsome home behind it that warranted a change of plans. Less than
100 yards away stood the physical embodiment of his dream home. It
was all there: the fieldstone and clapboard exterior, the oversized
windows, the beautifully crafted dry wall that hemmed in the
property. This Sunday drive brought home for Cameron a dilemma
debated by the vast majority of repeat homebuyers: Do I buy first or
sell first?
Of
course, the ideal scenario would be to buy and sell simultaneously.
But such timing is never guaranteed. Most homebuyers will need to
decide to buy a home then sell their current home or sell
their current home then look for a new home. If you're
contemplating a move, consider the pros and cons of each strategy.
Buying
a home first can have its advantages, especially if the home is that
special find that may happen only once in a lifetime. But to get the
property you want, you will need to know how much equity you'll need
out of your present home, and have an established sale target date.
If your home doesn't sell by the time you close, you could consider
the option of renting it to hold out for the best offer.
On
the downside, you could end up with two houses. To pursue a
buy-first scenario, many people use their home equity line of credit
as a "bridge" or "swing" loan to provide for the
new down payment. However, to qualify, homeowners generally need a
sizeable income. Even if you qualify, the stress of owing on three
mortgages (the old mortgage, the bridge loan and the new home
mortgage) might force you to sell your home at a price lower than
you hoped. Keep in mind that market conditions change. In the end,
you don't know how much you'll get for your present home.
The
less stressful scenario calls for selling your home first. It's easy
to understand why: you know just how much you can spend on a new
home; you avoid carrying three mortgages; and you won't require a
home-sale contingency, which may make negotiations easier. The new
owners may agree to a long closing or a rent-back option so you can
take your time, look around, and buy the house that's just right for
you.
It's
worth noting a few disadvantages to selling your home first. You may
feel great pressure to find something fast and even settle for a
less-than-ideal home. You may require interim housing, which could
be very stressful if you have to stay with family or friends for an
extended period. Should you decide to rent, it may be difficult to
find suitable housing, especially if you have pets. In either case,
furniture would have to be moved twice and possibly stored long
term. If your house hunting efforts are focused on your old
community, selling first may also involve paying tuition to the
former school district so your child can continue attending school
there.
Buy
first or sell first. How can Cameron and you choose between the
options? First, assess your financial condition. Is it healthy
enough to withstand a buy-first scenario? How well do you handle
stress? Do you have the resources to manage three mortgages and the
added responsibility (as a landlord) that comes with renters? If you
sell first, can you adjust to interim accommodations? Would they be
practical for the long term?
These
are all things you'll need to consider. But you don't have to do it
alone. A real estate professional can offer expert assistance to
ensure a smooth transition.
If you have questions about this or any other
home buying or selling subject, confer with the real estate
professionals who can help provide you with more detail…
We
can be reached at (310) 265-2130
Prudential California Realty is an independently owned and operated
member
|of The Prudential Real Estate Affiliates, Inc., a Prudential
Financial company.
Equal Housing
Opportunity
|