Consider real estate’s version of the chicken or the egg question: what comes first — listing your current home for sale or buying your new home? While there’s no universal answer, weigh the advantages of each option to help hatch your own solution.
In this article, we’ll consider the three main advantages of listing your home first, before buying a new home. In our follow up article, we will explore reasons to consider the opposite.
Why You Should List Your Home First
Advantage #1: Know What You Can Afford
Most consumers start looking for a new house before they start the listing process because, let’s face it, buying is usually more fun than selling.
Yet by looking for a new home before listing your current one, you likely won’t know how much you can realistically buy the new house for and when you’d be able to move in. So even if you find the perfect home, it might not be practical to buy it, depending on when and how much your home sells for. That’s because most people believe that their homes will sell faster and for more money than how the actual sale process turns out.
To avoid this problem, homeowners can leverage Home Bay’s depth of experience that combines third-party and first-party data, along with our proprietary set of guidelines based on over 1200 home sales. Our process, which continues to be refined and optimized, helps homeowners accurately price homes to sell, as evidenced by our 99% sale-to-list ratio*, which beats the California Association of Realtors (CAR) average.
Starting with the most accurate listing price gives sellers a fair assessment of affordability when searching for a new home. On the other hand, working with an inexperienced team or agent can create a gap between listing price expectations and reality, causing buyers to go over budget on their next home.
Plus, if you start the home buying process before having an accurate expectation of how long it will take to sell your home, you could find yourself in a sticky situation when it comes to completing both transactions. As explained in more detail in the next two sections, inaccurate expectations are not only inconvenient but can also dent profits and cause deals to fall through.
Advantage #2: Streamline the Home-Buying Process
When someone finds a house they want to buy before listing their current home, they often ask for closing to be contingent on the buyer selling their current home.
This contingency puts the seller in a tough bind: accept the contingency and take the house off the market while being unsure when and if the deal will definitely go through; or, reject the contingency and lose out on a potential buyer.
Sellers may not even be able to get buyers to accept their contingencies, and even if they do, the deals can get more complicated. If you don’t list your home before making an offer on another one, how do you know whether that contingency will last for a month or a year?
From listing to close, the average home sells in 68 days, according to data from Zillow. Yet this varies quite a bit based on factors such as location, home type and market conditions. For example, in San Francisco, homes sell in 38 days on average, whereas it takes 137 days in New York City.
Complicating the picture further, listing times vary significantly from state to state. Generally, states with smaller populations have longer listing periods, even when average home prices are low. However, other than California, states with the shortest listing times are not particularly large states and listing prices are above the national median.
States Where Homes Have Longest Time on Market
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States Where Homes Have Shortest Time on Market
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It is difficult to draw any clear conclusions about how long it will take to sell a home based on simply one or two factors. Even when forming expectations based on location or listing price, plenty of other variables ranging from the season to the broader economy can further delay the sale of a home.
And don’t worry about being left without a place to live if you find a buyer before you find a new home to move into. An experience team of agents such as Home Bay can help sellers set up their own contingencies so that their buyers wait to close until the seller finds a new home.
While this does add a layer of complexity to your listing, many individuals in the market prefer to have contingencies on their own sales rather than adding them to their home-buying offers. That’s because an offer on a new home often looks stronger when the seller knows that the prospective buyer already has their own sale lined up.
Advantage #3: Maximize the Money You Make Selling Your Home
If you find the perfect home to buy before listing your current one, you might be pressured into quickly selling your home so as to not lose the offer. Doing so is not only stressful; it also causes sellers to accept less-than-ideal offers if it allows them to unload their homes so they can meet the contingencies of buying new ones.
In this case, time really does equal money. By listing your home before buying a new one, you can afford to wait for the best offers to come in to maximize the selling price.
Too often, however, sellers accept offers far below their listing prices because they didn’t have an accurate view of the market and/or they rushed to sell. In fact, nearly ten times as many listings go through a price decrease than a price increase, according to Realtor.com data.
Listing your home first affords sellers the time to understand what they can sell their home for; and not having any contingencies hanging in the balance allows them to wait for the strongest offer.
Know Before You Buy
If homebuyers do not have a firm grasp of when their existing homes will sell and for how much — not just by estimating based on averages but by actually listing their properties and seeing if they get second showings or actual offers — then they could end up making offers on homes long before they’re able to sell their own.
Waiting until you have a strong indication or even a firm offer for what you can sell your home for allows you to enter the home-buying process with a strong grasp of what you can afford and when you can close the deal. This knowledge allows you to make a strong offer for your new home while maximizing the proceeds from the sale of your current home.
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