Buy First Or Sell First?
With risk of sounding like a smart alec, it really depends on how much money you have available. When I say money, I don't mean equity, I mean liquid cash. For 95% of the population, most of the money they have is tied up in their home and is equity and not cash. Therefore, in order for them to buy the home they strolled into and fell in love with on a Sunday without the sale of their present property, is unrealistic.
This is where it gets complicated so hang in there with me! At this point, your average buyer is trying to think of someway to finagle their way into this house they fell in love with. Here are your options and the risks associated with them. We've added our two cents in when necessary. Hopefully, this will guide you to the appropriate option that's right for you.
Option 1:
If you have the money in savings or an equity line, you can use that as your down payment and finance the rest. You will need to qualify for the new home based on your present income and expenses including your present mortgage payment. Keep in mind, however, that many mortgage companies won't want to finance you if they know you are about to sell your house and will be refinancing this loan once your present home sells.
If they do, they will be incorporating extra points. A point is a fee charged by the bank which amounts to 1% of the mortgage amount.
RISKS: If you can't afford to hold onto both properties, be careful. Your present home may not sell as fast as you think so you should plan on those carrying costs for between 6 months and 1 year.
Option 2:
You could convince the seller to take the house off the market while you try to sell yours.
RISKS: Most sellers will not agree to this and will at best incorporate what's called a "kick out clause" into the agreement. This simply means that should they come up with a buyer who is in fact ready willing and able to buy you will have 24 hours to remove your contingency to sell your house. If you need the equity from the sale of your home you won't be able to remove that contingency and your home will slip away from you. We do not recommend this strategy because it may look like you have the house but in fact you don't. If you truly need the equity from the sale of your present property, go to Option 3.
Option 3:
WAIT! That's right, wait. List your home with Cabot & Company and when it sells, we will set the closing date 90 days from the purchase and sales. That will give you 2 whole months to find your dream home. Once it's found, we'll coordinate the two closings so you will move from the house you presently own right into the house you are buying.
RISKS: If you don't find a house in 60 days, there will be a gap between where you were and where you are going, which is why it's critical that you take those 2 months and find a house!
Our Two Cents:
In most cases, "Option 3" is the best choice. Take things one step at a time. Know how much money you will make from the sale of your home before you go out looking. As you may have noticed, there is an element of risk in all three options. Work with your Cabot & Company agent to help you choose which option works best for you and your family. Our job is to point you in the right direction and we will be conservative! We will explain every option and every risk before you begin.
If you would be interested in getting more information on selling your home, please complete the form below and someone will be in touch with you shortly!