Real Estate: Is It Smart To Buy Before You Sell?
Deciding the right time to enter the real estate market is a major financial decision, and it’s even trickier if you already reside in a home. If you’re planning to sell your current residence and move into another, you have an important choice to make. You don’t want to pull the trigger too early and risk needing to move out before securing a new home. However, you also might not want to be responsible for the cost of two homes for however long it takes to sell your current place. So when it comes to this aspect of real estate, you might wonder if it’s smart to buy before you sell, or vice versa. The answer depends on your financial situation, risk tolerance, and local market conditions. Let’s explore the nuances so you can make the best choice for your situation.
The Appeal of Buying First
Securing a new home before you sell offers clear advantages. It removes the pressure of finding a new place to live while under contract with a buyer. You can move on your own schedule, avoiding the need for temporary housing or rushing into a purchase you might later regret. It lets you take your time to find a home that truly fits your criteria. It also means you can make a strong, non-contingent offer on a property you love, which is a powerful negotiating tool in a competitive market.
Financial Risks To Consider
The primary challenge of buying first is managing the financial load. Carrying two mortgages, even for a short period, can strain your finances. You will be responsible for property taxes, insurance, and maintenance costs on both homes.
To manage this, many people use a bridge loan. This is a short-term advance that covers the down payment on the new property until your current one sells. You can also try a Home Equity Line of Credit (HELOC) on your current residence. Both options come with interest costs and require a strong credit profile and sufficient home equity. You must assess your financial capacity to handle these extra costs.
Market Conditions That Factor In
The state of the housing market plays a big role. In a seller’s market, where homes sell quickly, buying first is less risky. You can be reasonably confident your current home will sell in a timely manner.
In a buyer’s market, however, your home could sit on the market for quite a long while. This extends the financial burden of owning two properties.
A well-researched market analysis is essential before making a move. And remember that you should never list your home in a hurry; proper timing and strategy will save you many regrets down the road.
Final Considerations
Before you decide if it’s smart to buy before you sell, speak with a financial advisor and a real estate professional. They can provide a clear picture of your financial options and what to expect from your local market. A careful evaluation with their help will indicate if you are in a strong enough position to manage the process of buying before selling. Overall, this path offers convenience and leverage but requires careful financial planning to mitigate the risks involved.
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