The Case for Buying a New Home Before Listing Your Current Home
Timing is everything, including when it comes to deciding when to buy a new home and when to list your current one for sale. Closing on a purchase and a sale at exactly the same time is difficult at best, so real estate participants often need to decide which to engage in first.
While there are advantages to each option, the decision comes down to considering what works best for your particular situation. In a previous article, we explored the benefits of listing a home before buying a new one; in this article, we explore three main reasons why homeowners should buy a new home first.
Advantage #1: Take Your Time
Real estate transactions typically involve longer, more complex processes for the buyer than for the seller due to scouting out new neighborhoods, home inspections, mortgage approvals and more. While the seller also has to wait for some of these processes to conclude, the buyer typically bears responsibility, such as with initiating home inspections. Thus, it can be an advantage to get through the buying process without being rushed or having any contingencies hanging in the balance.
On average, buyers spend four months looking for a home, and finding the right one can be so difficult that 43% consider renting instead at some point during the process, according to Zillow. In comparison, Zillow found the average home sells in 68 days from listing to close. So if someone lists their home first, it might sell before they have enough time to explore all their options in the homebuying process.
Think about this process relative to finding a new job and leaving your current one. Finding a new job can take months, but wrapping up responsibilities at a current job might only take a few weeks. So if you announce that you are leaving your current job before finding a new one, you might rush to accept a new position to not show a gap in employment, even if the new job isn’t the best fit.
Likewise, a homebuyer might prefer to spend a few months exploring different neighborhoods and getting a sense for all the intricacies of closing on a home before finalizing anything. Yet if they list their home first and it happens to sell quickly, they could be in a tricky position: even if a seller adds a contingency where the sale is on hold until that person finds a new home to buy, that can still rush someone through the homebuying process. As a result, that person might settle on buying a less-than-ideal home, whether that’s because of the price, location, size, etc.
Advantage #2: Be Ready to Sell
Buying a new home before listing your current one puts you in a position to sell as soon as the new buyer can close on the deal, which can sometimes be help sellers close deals.
For example, in a buyer’s market with sufficient available inventory, a buyer might not want to purchase a home where the seller needs a contingency that the sale must wait to close until the seller finds a new home. Instead, the buyer could turn to one of the many other options on the market where they could move in faster. So if someone buys a new home first, they won’t need a contingency that could slow down the sale of their current home.
In addition, buying a new home first can help you narrow down exactly how much you want to list your home for. For example, if someone gets a good deal a home purchase, they might be more willing to price their home for sale at the lower end of an acceptable range, rather than trying to squeeze out of every dollar of profit possible. A home that’s priced to sell can close quickly, thereby helping the seller free up time and monetary liquidity to move into their new home.
In other cases, someone buying a new home first might realize that they need to sell their home for a certain amount toward the higher end of the spectrum in order to be able to afford the new home. Knowing this takes the guesswork out of listing a home and enables sellers to streamline the process; if someone makes a discounted offer, the seller can quickly counter with the price they know they need to sell at.
Homeowners can also prepare their homes for sale while buying a new one so that as soon as it’s officially listed it’s ready for sale. That includes steps such as preparing a pre-inspection report, staging and taking professional photos. A seller can then pause there, secure a new home, and then list their existing one knowing how much they want to sell for and when they’ll be able to move out.
Advantage #3: Make the Moving Process Easier
Another key advantage of buying a new home first is that it can make moving far simpler. Specifically, if a buyer has the financial ability to close on a new home while they still have their current home, they can move into the new home at their own pace, rather than needing to pack, clean and move everything quickly.
Doing so can be particularly convenient if someone isn’t sure exactly what they want to move. For example, someone’s living room furniture might not be a good fit for the shape or the style of the living room in a new home. Rather than moving that furniture into the new home only to have to buy replacements while trying to get rid of the old furniture, someone who buys the new home first could figure out exactly what furniture they want to bring.
In addition, starting to move into the new home can make it easier to stage the old home for sale, as the seller’s personal items can be moved into the new home. Doing so could help the old home sell faster and closer to the list price, thereby potentially offsetting the cost of owning two homes at once for a short period.
Lastly, buying a new home first can help people avoid having to move into temporary housing such as a hotel during the time between selling their current home and buying a new one.
However, it’s important to note that selling a home first before closing on a new one does not mean that the seller will be left homeless. A good agent can help sellers establish a contingency where the transaction will not close until the seller finds a new home so that there’s no gap in housing. As mentioned earlier, though, some people might prefer to avoid this contingency altogether in order to speed up the home-selling process. Buying a new home first helps avoid both contingencies and gaps in housing.
Weigh Your Options
Buying a home before listing your current one can be beneficial in many ways, but it’s important to weigh these advantages against the benefits of listing your home first to see how you can come out ahead.
Specifically, consider the value of taking your time buying a new home, knowing the cost of the new home before selling, being ready to sell quickly and being able to plan out or even start to move while you still own your current home.
If these benefits outweigh knowing exactly how much your home will sell for before buying, being able to streamline the buying process without contingencies and maximizing the value of your home sale by being able to wait for the strongest offer, then buying a new home first is the way to go.
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