Trading Up: Tips for Selling Your Home and Buying Another
How not to get stuck paying two mortgages.
If you plan to sell your home and buy another, which should you do first? If you sell first, you'll be under time pressure to find another house quickly -- and may end up settling for less than you wanted, or overpaying. But if you buy first, you'll have to scramble to sell your old house -- a particular problem if you need to top dollar on your old house in order to make the down payment on the new one.
Here are some ways to minimize the financial and psychological downsides of selling one house while buying another.
Take the Housing Market's Temperature
Before putting your house on the market or committing to buying a new one, investigate the prices of houses in the areas where you'll be both selling and buying. In order to figure out how to sell high and buy low, you'll need a realistic idea of how much comparable houses are going for.
Also focus on whether the market is "hot" (favors sellers) or "cold" (favors buyers). Since you're both a buyer and a seller, you'll need to protect yourself in your weaker role while letting your stronger role take care of itself.
Strategies in a Seller's Market
In a hot market, selling your house will likely be easier than buying a new one. To make sure you don't end up house-less, negotiate with your house's buyer. After the buyer makes a written offer on your house, include a provision in your written counteroffer stipulating that the sale of your current house be contingent upon your finding and closing on a new house.
Although few buyers will agree to an open-ended period, some will be so eager to buy your house that they'll agree to delay the closing until you close on a new house or until a certain number of days pass, whichever comes first.
Strategies in a Buyer's Market
In a cooler market, you're in a stronger position as a buyer than as a seller. To protect yourself, consider making your offer to buy a new house contingent upon your selling your current one. A seller having a hard time finding a buyer is likely to accept this contingency, even though it means waiting for you to find a buyer.
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