Whether selling your home before buying a new one is a good idea or not is largely dependent upon current market conditions, and how quickly homes are being sold and purchased.
The risk factors involved in this scenario also depend upon personal circumstances, primarily when it comes to finances, mortgages, and preferences.
Personal Finances And Mortgages
Often the question of whether you should buy a new piece of real estate before selling your home is this: Can you afford two mortgages? If the answer is yes, this should be reflected in the ability to get another mortgage through your lender.
If you can get approved for a second mortgage to purchase a new home without the necessity of selling your old one first, then the option is yours.
But for security measures, and in the event that it takes longer than expected to get your first home rented out, you should ensure that you can afford to pay both mortgages for at least two to three months.
Buying Before Selling In A Slow Market
In a slow market, it is typically not a good idea to purchase a new home before selling your current home, since these kinds of markets are characterized by a significantly greater number of sellers than buyers. In a slow market, homes take much longer to sell, and the longer they remain on the market, the more difficult the sale tends to become.
If you aren’t very aggressive on the price point of your old home, this also causes more restrictions and a greater risk of having two mortgages to pay because of the inability to sell.
What About A Hot Market?
A hot market can often mean higher pressure; there are many buyers on the market and fewer sellers, and all of the good homes are getting snatched up quite quickly because they are harder to find.
In these markets, it’s typical for prospective buyers to find their next dream home before even putting their current home on the market, and these situations often lead to buying before selling as a result of pure enthusiasm and competitiveness for the new home.
Buying before selling in a hot market like this is less risky, but should still be considered with caution. Because a “subject to sale” is much less likely to be accepted by a seller in a hot market, especially when the “subject to sale” home isn’t on the market yet, you’ll want to ensure your house is readily saleable before making the commitment to buy something.
You’ll also want to ensure you consider the worst, and, if you choose to buy before selling, make sure you have a financial safety net for the “just in case” circumstance of two mortgages at once.
To get a better idea of whether you should buy a new house before yours is sold based on the current market conditions, you should do sufficient research. Call your real estate professional today to gain a clearer understanding of what your best, and safest, option is.