Buy or Sell First?
The chicken-and-egg question
For homeowners aiming to sell their home and buy another, it's the classic real estate, which came first, the chicken or the egg, question—buy or sell first?
Gregor says that if you have the money to make two mortgage payments, the pressure is off. But if you need to sell your house in order to qualify for a loan, then you have no choice—you'll have to sell first. "You can write contingent contracts, but if you really want the home, you'll pay a premium—that's if the seller will even entertain a contingent offer," he says.
Gregor says for most people, the stress level is lower when you sell first.
"You have time to get pre-approved for your mortgage and see all the housing options in the price range you'd like to buy," he said.
Brett Furman, a broker in suburban Philadelphia, says the strong market dictates that homebuyers focus on buying first, and selling later.
"The housing market in the suburban Philadelphia market is moving very quickly," said Furman. "Normally we advise our buyers to sell their home first and buy second ... However with the faster moving market, we are advising many of our buyer clients to obtain a mortgage commitment that is not contingent upon selling their existing house."
In their book, House Selling for Dummies (Hungry Minds Inc., 1999), Eric Tyson and Ray Brown "strongly recommend" that you sell first.
"Even in good real estate markets, sales frequently drag on much longer than you expect," the authors say. "Selling in a weak market usually compounds the problem. Homeowners tend to overestimate their house's resale value and underestimate the length of the selling process—a fiscally deadly one-two punch."
The Dummies book says selling first eliminates financial risk—no double mortgages and double payments for property taxes and insurance payments. And no worrying about how you'll come up with a down payment.
Whichever way you go, it always seems to work out in the end, at least in Gregor's experience. "I've been in the business for 30 years," he said. "We've never had anyone out on the street and the vast majority of our clients that make double moves are those building new homes that had to have their property sold first."