Dear Claire: Should I Sell Before I Buy My Next Home? Or Buy Before I Sell?
Balancing Buying and Selling: Which Should Come First?
If you’re thinking about buying a new property to live in, you may be asking yourself if you should sell first and then buy go buy a home, or vice versa. This is a sort of a chicken-and-egg question because frankly, there’s no right answer to it.
My suggestion to you is to go with the one you’re most worried about. What I mean by that, is if you’re most worried about finding your next house and you need it to have 15 bathrooms and a three-car garage or whatever, you’re looking for, it has to be in the certain school district. I would probably try and buy first because that’ll put your mind at ease.
On the flip side, if you’re most worried about selling for the exact right amount of money and if you don’t sell for the amount of money that you want, then you don’t want to buy something in a certain price range, you should probably sell first. It really just kind of depends on where your biggest concerns are first and then I’d suggest we do the other one.
There are some tricks in that we can help you buy a property first and then, if you wanted that extra money from your original house to go onto your new property, so that you can lower your mortgage payment, there are some things you can do. There are specific loan programs that have something called a ‘recast,’ and that is typically something that you’re going to want to talk with your mortgage lender about to make sure you can do it with the loan that you’re getting on the new property.
There’s also what’s called a ‘Bridge Loan,’ which means you’re qualifying for both mortgages at the same time but they’re giving you a loan based on the fact that they know this other house is going to sell and you’re going to bring that money over and put it towards the down payment on the new purchase on the selling side.
I think there’s a lot of misunderstandings about if I’ve lived in my house for a few years and I’ve owned it for a few years I don’t actually have to buy another property. Now this is only if we’re talking about your principal residence. If it’s an investment property, to avoid capital gains you’re going to want to do a 1031 exchange and there are very clear timelines associated and you have to buy a replacement property. But if it’s your home and you’ve lived there for a long time and you have a lot of gain in it, you don’t necessarily have to buy a replacement property. If you’re going to buy a replacement property, you can start actually looking for a home once your property is in contract and probably really before that because once your contract, your offer is going to be pretty well accepted as competitive because it’s going to be sold. And you know what? You’re going to clear. So, it shouldn’t be that big of a deal as you can imagine.
This is pretty complicated subject, so there’s always questions around it. Just let me know any you want me to answer about this and any other topic. Also, hop on over to our Paris Group Realty, LLC YouTube channel –there’s all kinds of more content over there too if you’re interested. I hope you have a great week and we’ll talk to you soon. Take care.
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