Should You Buy or Sell First?

Probably one of the most common questions asked by many Buyers and Sellers that I have worked with is:

Should I sell my existing house first or should I purchase a new home first?

Of course the ideal situation is that you find a new home, just as you receive the offer on your existing home. You would then be able to close concurrently and move into your new home a few days prior to closing on your previous home. This situation can happen more often than not, but when you are looking to purchase a new home you must review all scenarios before moving forward. However, you cannot always count on the ideal situation happening.

So…should you buy or sell first? Ultimately, the answer depends on your individual situation and your answers to various questions, like:

Can you afford to pay two mortgages in the event that your existing home does not sell by the time you are moving into the new home?

Would you consider a bridge loan (a short-term, high interest loan that lets you borrow against the value of your old home to cover the bills until you secure the new, larger loan)?

Are you willing to secure an intermediate living arrangement while you find the home of your dreams if you sell first and can’t find the dream home quick enough?

An analysis of the current housing market may also be helpful in setting your expectations. You should try to find out what the current demand for the type of houses you are trying to sell and buy happens to be and also for their respective price ranges. An experienced real estate agent should be able to help you gather those statistics, since they are working in the marketplace. They can also help you with a contract contingency called a Hubbard Clause. Understanding interest rate trends is also a plus.

In general, it is less stressful to sell your existing home first, this way you will not have to worry about owning two homes at one time. Some of the factors that will dictate how quickly you will sell your home are the market conditions, location, time-of-year and interest rate expectations. It’s a good idea to put your home on the market as far in advance as possible when purchasing a new one. But, if interest rates are good and there is a short supply of available homes, your home will most likely sell faster. In that case, you may want to purchase your new home first.

Let’s look at the scenario where your existing home sells before you find a new one. This will put pressure on you to find the right house quickly, but you have some options:

You could make an interim move (find a short-term rental or move in with relatives)

You could request to rent back your home for a specified amount of time while you continue your search for the new home.

Those may be worthwhile options if you have your heart set on a specific type of home or if you are planning to purchase a home that is under construction.

So should you buy or sell first? It’s the question for the ages, but it really depends on your own circumstances and understanding the factors mentioned above and the current market conditions. Your knowledge in this area will help make that decision easier for you when the time comes.

The Importance of a Pre-Closing Inspection

Imagine the following scenario:

You have just purchased a pre-existing home and in the sales contract, the sellers of your new home agreed to leave all the light fixtures, custom blinds, chandelier, and refrigerator. But, when you walk in the home on moving day, to your astonishment, all of those items are gone. In addition, the locks on the back door are broken; there was a bucket of paint spilled all over the living room hardwood floor, and the garage opener doesn’t work.

Can this happen? The answer is yes!

Although the example above may be an extreme case, things like this and more have happened, which is why it is very important to have a final inspection of the home you are purchasing before the closing. A pre-closing walk-thru gives you, one last opportunity that you are getting what has been promised as part of the sales contract. Although buyers still have legal recourse if they discover, even after the closing that things are not as they should be. The best time to identify the issues is before closing when the seller will be motivated to correct any deficiencies in order to close the transaction.

Typically, a buyer takes possession of a property one to three months after signing the sales agreement. But, a lot can happen before the actual time to move in. Appliances and fixtures can break down, and walls, carpets and doors can be damaged during the seller’s moving out. Sometimes the seller will swap a refrigerator on the lower level of a house and take the kitchen refrigerator. Other times the seller’s may forget they said they will leave the window treatments with the house. Whatever the reason problems that are identified prior to closing have the best chance of getting resolved.

If possible schedule the final inspection as close to the closing as possible. You want it to take place when the seller has completely vacated the premises. Your real estate professional should attend the inspection with you. You ask, what should I be inspecting? Use a copy of the sales contract as a checklist; first make sure that all items that should be in place (appliances, built-ins, window treatments, lighting fixtures, carpeting, etc.) are there.

Test the appliances to make sure they are working. You could bring along an electric clock or plug-in night-light to test the electrical outlets. Test all electrical switches and the garage door opener, if one exists. Turn on each water faucet and check for leaks under sinks and run the garbage disposal. Flush all toilets. Inspect the floors, carpets, walls and doors for any recent damages.

Another area to check very closely is the exterior of the home. Ensure that unwanted things were not left on the property. Try to walk the entire property to determine that no one is living on any portion of the property that the seller may have been unaware of.

If you do discover that something is damaged or missing, make a note of it and notify the real estate professional immediately. In most cases, the seller is usually able to take care of small problems in a timely fashion, either by making the repair or offering compensation to handle it. And if there are major problems, the seller can agree to sign a statement acknowledging the defect and agree to correct it.

Although pre-closing inspections take time and may be inconvenient with your schedule, they are important and well worth the buyer’s time. I would not advise anyone to purchase a home without one.

Insights on Selling Your Home…

Ever wondered what is really involved in the Home Selling process? If you are like me before I became a Realtor, I basically thought you place a sign on the property and place some ads and the house will sell. But, as you will discover, there is much more involved in the process to sell your home and obtain the best price. I’ll highlight some key items and facts below.

The home selling process should be tailored to fit the characteristics of your property. Each property has special features that will interest buyers. These are very important to identify because they are extremely important in marketing your home effectively. To successfully promote your property to the market, a comprehensive plan of targeted activities is imperative. There are certain ways that are more effective for buyers to find the home they purchase, but they are most likely to actually find the home and purchase through a real estate professional. It makes it very important to promote it in the correct manner to gain the most effective exposure to prospective buyers.

Which leads me to understanding market value. Pricing appropriately can be the key to maximum market exposure and a satisfactory sale. Some factors that have little or no influence on the market value of a house:

The price the homeowner originally paid for the house.

The homeowner’s expected net proceeds.

The amount spent on improvements in the home.

When a property is priced within the market range, it will generate more showings and offers, and sell in shorter amount of time. If a property is priced too high it will have difficulty selling. You may see many, many showings but never receive an offer or you may have no showings at all.

An evaluation of the current market activity is the only effective way to determine price. You cannot only look at recent sales to determine the correct pricing. Yes recent sales factor in greatly, but you also need to look at what else is currently on the market, and what properties have failed to sell and for what reason. You also need to know the features or the downsides to homes that have recently sold to be able to factor that into your pricing. So as you can see it’s not so easy to just attach a price to a property.

Another item you need to understand is how will buyers see your property. Real Estate agents work with buyers every day and they know exactly how a buyer will view your property. It is definitely not from a seller’s point of view. You need to be made aware of what can interfere with a buyer’s appreciation of a property. I’ll mention a few: clutter, oil spots in the driveway, peeling paint, anything that looks worn out, marks on walls, and soiled windows just to name a few. If a buyer sees work they see a reduction in an offer. There are many more things that can be done to remove distractions to obtain strong offers and a real estate professional can offer those suggestions to you.

Do you know who holds the most important role in the home selling process? It is you the seller!!! Here are some ways you can contribute to a successful sale. Be flexible in the scheduling of showings. Lock up valuables, jewelry, cash and any prescription drugs. Do not allow anyone into the property without an escort. Pets need to be kept secure during showings. These are only some of your responsibilities as a seller.

I have only touched on some of the items that are important in the home selling process. In future posts, I’ll be talking about some other important things to consider as well as covering some of the more frequently asked questions and giving you more insights on the real estate market.