Upgrading homes by selling one and buying another is commonplace. People do it all the time. However, there are benefits to not attempting a simultaneous upgrade. Selling and closing on that deal first, before buying something new, can eliminate a few headaches and make both processes easier.
If you are not looking to sell or buy first, you’re left with handling both transactions simultaneously. This can obviously be done. It is just that simultaneous transactions are more complicated. You are working with people on both ends along with multiple lenders, at least two attorneys, and how many real estate brokers or agents?
Buying first isn’t for everyone. But for those who have the stomach for it, here are five reasons selling first can be advantageous:
1. Selling Unlocks Your Equity
Whether you are buying a first house or upgrading, having a down payment is not an option. You have to put something down. There are closing costs as well. Selling first unlocks the equity in your existing home. You can put that money toward your new place.
Unlocking your equity could increase your budget. It could also mean paying all associated costs up front rather than financing them. Most importantly, having enough equity to make a down payment of at least 20% will eliminate the requirement for mortgage insurance.
2. Avoiding Dual Payments
Speaking of mortgages, attempting simultaneous transactions could leave you paying on two mortgages. You can avoid two monthly payments by selling first. Of course, you might have to find temporary living arrangements until you buy a new house. But that’s still better than paying on two mortgages in hopes that you can sell before the money runs out.
3. Gaining Leverage as a Buyer
Selling first gives you more leverage as a buyer. The real estate agents at Salt Lake City’s CityHome Collective explain that it is all about contingencies. Managing two transactions simultaneously often means making an offer on a new home contingent upon the sale of your current home. That’s okay in a slow buyer’s market, but not in a seller’s market.
CityHome Collective says the Salt Lake City market is as hot as it has ever been. They say buyers who have no contingencies come in with greater leverage. They have a down payment and pre-approval from their lenders. More often than not, they win competitive bids.
4. A Better Price on Your Sale
Trying to sell and buy at the same time puts you in a position of having to make uncomfortable choices. For example, you might be willing to take the first offer that comes along because you don’t want to blow the contingent offer you made a few days earlier. But that means you might not be getting the best price. Buying first takes the pressure off. You are more likely to get a better price because you are in no rush to move.
5. More Choices for Your Purchase
The other side of the better price point is having more choices for your purchase. You have already sold your home and closed the deal. Now you’ve settled into your temporary living arrangements while you shop for your new home. All the pressure is off. You don’t have to buy the first home you look at. Take your time and make the best choice without the pressure of having to close a sale and move out of your old home.
Plenty of people buy and sell simultaneously. If you would like a different kind of experience that typically involves less pressure and more options, consider selling your house first. Close the deal, then look for a new place.