Obviously, the following scenario is the best.  You sell your house before you buy a new one and quickly find a house you want.  You then set the closing date on the house you are buying on the closing date of the house you are selling.  This would be great but unfortunately it doesn’t always work out that way.

Which route you take depends upon your own personal situation.  Here are three possible situations:

Ø      You have enough money to pay the down payment on a new house and make payments on both houses until your original house sells.   I wish we could all be in that situation.

Ø      You can take out either a home equity loan or a bridge loan to get the down payment on a house.   You then have enough money to make double payments for a while.  This is assuming you have good enough credit to get the loan to do it.

Ø      You have enough for a down payment and can make two payments provided you cut back on extras - like food.

Ø      You cannot buy a new house until you get your money out of your present house.

Buyer Information

Why You Need a Buyers Agent

How Long Will Home Items Last

Buying A House

Buy First or Sell First

Finance Information

Amortization

Credit Ratings

Down Payment

Where to Go For A Loan

Additional Costs to Consider

Questions to Ask Lender

What Can You Afford

Financing a Home

Selling A Home

Selling a House

Seller Mistakes to Avoid

Preparing Your House to Sell

What Is Your House Worth

Buy First or Sell First

If you “buy/make an offer” before you sell:

Advantages

1. You have already found the house you want and feel you must purchase it before it is gone.
2. You can avoid the confusion of trying to buy and sell at the same time.
3. You “know” you will have a place in which to move

Disadvantages

1. You may be put in a position to buy high and sell low
2. You can end up with two house payments
3. You may not be able to afford two loan payments or to even qualify
4. Using the contingency that “You will buy a house contingent upon your house selling” will probably weaken your buying position  
5. Using this contingency may still allow someone else to buy the house you want, while trying to sell yours.  Or you could be forced into financing the property immediately or losing it to someone with financing.
6. Using the above contingency, you put yourself in the position of having to sell quickly, thus weakening your selling position.

Steps to take:

1. Try using the “contingency upon selling your house”.  This contingency may work quite well, unfortunately it doesn’t work well in a hot market.
2. Use a bridge loan or a home equity loan to make your down payment.
3. Ask for a short escrow period on the house you are selling.  This would reduce the number of double payments you would make.
4. Ask for a long escrow period on the house you are buying.

If you “sell” first:

Advantages:

1. You can put all efforts on one thing at a time.
2. Better negotiation position when you sell
3. Easier to get mortgage approval
4. With money in hand and not having to worry about selling – you will be in a stronger buying position.
5. If you rent for awhile, you can wait patiently for your perfect house while putting yourself in the best negotiating position for both buying and selling.

Disadvantages:

1.                  May put you in a weaker position of “buying quickly” in order to have a place to live.

2.                  May have problems finding a place to live temporarily.

3.                  May have to store some of your property, giving added cost and hassles.

4.                  Where will the children go to school?

5.                  You may have to move twice adding to disruptions and cost.

Steps to Take:

1.                  Negotiate a possession period on the house you are selling.  Some areas allow up to 30 days. (This is not the norm in Central Kentucky – Most are “possession upon closing”)

2.                  Negotiate renting the house for a period of time.

3.                  You can familiarize yourself with areas you might want to move so that you can find a new house more quickly.

4.                  Ask for a long escrow period on the house you are selling.  This gives you more time to look.

5.                  When you find a house you want negotiate for a short escrow period.

6.                  Pretend you like your uncle Fred with the empty house.

7.                  Make the sale contingent upon you finding a new house. 

In most cases timing can be arranged to make it convenient for everyone, but remember that buying and selling houses creates a domino effect.   The person you are buying your new house has the same problems that you do, and so the does the person who is buying yours, etc, etc, etc.