Is buying a house before listing your current one a good idea? Or is it better to sell your current house first?
The answer is that it depends. People buy and sell a home every day using both methods. There are advantages and disadvantages to both.
Buying a House Before Selling: The Pros
Pro: You Don’t Have to Rush
One of the most stressful things that people find out when learning how to buy a house is the pain of feeling rushed. When you sell your current house first, that means you don’t have a lot of time to find your next home.
If you don’t get on contract with your next home quickly, you will find yourself in limbo between two homes. If you’re lucky, you can go live with family or friends for a while. But if that isn’t an option, you’ll need to hunker down in a hotel or short-term rental until you can buy your next home.
When you buy a house before listing, you don’t have to deal with this! You can move into the next house, then focus more on selling your old one. You won’t feel the stress of being between homes.
Pro: You Only Have to Move Once
When you buy a house before listing, you can take your furniture directly from your current home to your new one. You don’t need to deal with putting everything in a storage unit or having the moving company keep it at their warehouse for a while.
This is really great when you consider the advantage of not having to move into a short-term rental. If you have kids or pets, you probably don’t want to move into a tiny hotel room, hence moving into a bigger place. But moving into a short-term rental means you’re moving in your furniture, just to move back out when you get your new home!
It’s easier for home buyers if they can get by with just moving one time!.
Pro: Showings are Easy
If you sell a house before buying, you have to deal with the stress of showings. You essentially need your house to be so clean and ready for showings that your agent can call you and give you very short notice because someone wants to come to look at your house.
Saturday morning? Wednesday afternoon? Monday evening? It doesn’t matter. Homebuyers will show up at all times throughout the day, ready to walk through your home and see if they want to make it their own.
This is stressful! It’s not easy for some of us to keep our homes show-ready all the time, especially if we have pets or kids.
Fortunately, buying a house before selling alleviates this issue. You can be completely moved into your new home, making it a cinch to have the old house stay show-ready. You aren’t there to make it messy!
Cons of Buying a House Before Selling
Con: You Need Cash on Hand
While buying a house before listing is nice, it can be difficult for a lot of people. The first disadvantage is that you’ll need a lot of cash on hand to do this.
Consumerfinance.gov recommends putting down at least 20% when you buy a home. If you want to buy a home for $300,000 and put down 20%, you need at least $60,000 in cash. That’s without getting the equity from your current home. Do you have $60K laying around? If not, you’d have to take a bridge loan which can be expensive.
Maybe you have $40K, but that would lower your buying power to a house that costs $200,000. You might be okay with that, but essentially your cash restrictions are limiting which kind of house you can buy.
Con: Two Mortgages at Once
Can you afford two mortgages at the same time? That’s a struggle for most people. If your house sells quickly, the good news is you won’t be doing this for long. But what happens if it takes a while for your house to sell?
This, along with the cash issue, are the main reasons why most people have trouble buying a house before selling their current one.
Con: Higher Interest Rates
Even if you can get approval from a mortgage company for a second loan, your rates will probably be higher than if you sold your current house first.
Conclusion: Should You Buy Before You List?
Ask 10 home buyers how to buy a house and they’ll tell you 10 different things. There’s no “right” way to do it. Buying a house before listing is great, but just keep in mind it is challenging financially.
Do you have any questions about the home buying process? Send us a message – we’d love to help!