Should you sell your current home before buying the next, or is it better to buy first and then sell?
Deciding the best order to buy and sell homes is a common conundrum faced by many homeowners, especially in today’s fluctuating real estate markets. As a realtor in Bel Air, MD, and having navigated this process personally, I’m here to illuminate the different scenarios you might encounter and share insights to help guide your decision.
Understanding the Shifting Market
Since the pandemic in 2020, many areas have experienced a seller’s market (A seller’s market exists when there are more buyers looking to purchase homes than there are homes available. This scarcity typically drives up home prices and gives sellers the upper hand in negotiations). With that said, we’re now observing a gradual shift toward a more balanced market. In Harford County, this transition is reshaping the dynamics of buying and selling homes, indicating that strategies effective in the past may need reevaluation for today’s conditions. It’s also important to note that market conditions can vary significantly depending on your location.
My Personal Journey
When I was preparing to move, I fell in love with a new home before selling my old one. Initially, I thought we would need to make our purchase contingent on the sale of our current property—a situation where buying the new house depends on selling the old one. However, after consulting with a trusted local lender, we discovered that we could secure a bridge loan and proceed without the contingency. This financial flexibility allowed me to purchase the home I wanted without needing to make an overly aggressive offer due to the usual sale contingency. Furthermore, this arrangement gave us additional time to prepare our old home for sale, and we were able to better coordinate our move.
Navigating Different Scenarios: When to Buy or Sell First
Each situation is unique, but most people will find that one of the following three scenarios applies to them, depending on market conditions and personal financial circumstances:
1. Seller’s Market & Financially Able to Carry Two Mortgages
In the fortunate position I found myself in, where the market favors sellers and properties sell swiftly, buying your next home before selling your current one can be a strategic advantage if you have the financial means. This approach is suitable if you can manage the financial implications of two mortgages over a short period. It allows you to act quickly and decisively to secure a property that meets all your criteria, without the risk of it slipping through your fingers while waiting for your current home to sell.
2. Seller’s Market & Not Financially Able to Carry Two Mortgages
If financial constraints prevent you from carrying two mortgages in a seller’s market, the decision to sell will hinge on your risk tolerance. Selling your home before purchasing another typically positions you better financially. Without needing to include a home sale contingency in your offer—which often weakens bids—you can present a stronger, more attractive proposal to sellers. However, this choice comes with the risk of having a limited timeframe to find and secure your next home, which might lead you to settle for a property that doesn’t fully meet your expectations.
To mitigate this, your realtor can negotiate a “rent-back agreement,” which allows you to sell your home and then rent it back from the new owner for a specified period. This arrangement provides additional time to find your ideal home without the immediate pressure to move. Despite this buffer, the risk remains that the perfect home may not appear within this timeframe, leading to potential stress and compromise.
If the uncertainty of this situation is too stressful, you might consider buying first, though be prepared to pay a premium due to the necessity of a home sale contingency in your offer. This contingency means that your purchase is conditional upon the sale of your current home, a factor that can complicate negotiations and may require a higher bid to be competitive.
3. Buyer’s Market
In a buyer’s market, where homes typically remain available for longer and prices may be more flexible, selling your current property first offers significant advantages. By selling first, you’ll know exactly how much money you have at your disposal for your next purchase, putting you in a better negotiating position. With fewer buyers competing and more homes to choose from, you will likely find a home that meets your needs.
Consult with Local Experts: Lenders and Realtors
Before making your move, you should consult with some local experts. Talking to a local lender can clarify what financial products are available, including bridge loans that might allow you to manage both mortgages.
Similarly, a conversation with a local realtor can provide deep insights into the state of your local market, including current dynamics and realistic timelines for buying and selling. These professionals will equip you with the knowledge you need to make informed decisions tailored to your circumstances.
Making the Decision That’s Right for You
The decision to buy or sell first is deeply personal and depends on your individual circumstances, market conditions, and financial stability. If you’re contemplating your next move in Harford County’s real estate market and feel unsure about the best approach, don’t hesitate to reach out. As someone who’s been through this process both professionally and personally, I’m equipped to help you evaluate your options and make the transition as smooth as possible.