Buying a home before selling the current one can put you in a tight position. It’s a move that is not for everyone. You should ensure that you are financially flexible before you do so. There are both perks and risks of buying before selling. Here are the things you should know when buying a house before selling the existing one.
Advantages of buying a home before selling
When you decide to buy first before you sell you get to put your needs first. It gives you enough time to find the right home and customize it before you move in. Staging your current home will also be easier. You can even live at your new home and stage your old one with fewer disturbances.
Risks of buying a home before selling
There are lots of uncertainties involved in buying or selling a house. You should ensure that your financial status allows you to take such a risk. If you still have an outstanding mortgage for your current home, you should ensure that you are financially able to cover them both. Otherwise, this is a move that should be undertaken if you already have ready cash.
Buying your new home under a contingency clause will also be risky. Not many sellers are willing to wait until you sell your old house to purchase the new one. Also, the provision comes with uncertainties such as trust. Most sellers are not sure if you will honour your end of the bargain by putting every effort to sell your house for the right price as well as doing proper marketing.
Most sellers will want to prove that you can afford to buy their house without having to sell your current home. If you can’t get a pre-approval on a mortgage, then you will have to lose your home to another buyer.
You might also be tempted to rent out the old house so that you can afford the mortgage. It is risky since some renters do not take care of your home as you would. You end up spending more money on general repairs. They might even make it difficult for you when selling the house by refusing to allow you to show it.
Unless you already have the money in hand, you will have to come up with creative ways to come with the down payment required. Getting a second loan or even making a contingency contract may have failed. You can take a loan backed by your retirement funds, cash out refinance on your current home or also get a home equity line of credit.
When you purchase a new home, you will want to sell your house immediately to avoid paying the second mortgage. Make sure you adopt the right marketing strategies, hire an agent and put the right price to make the selling process easier and quicker. You can also rent out your home to the right person who will take care of it. It will make paying the mortgage easier. Also, check your finances to ensure you make the right decision.