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Sell or buy first?

If I want to purchase another home is it best to sell this house first or purchase the other home and then sell this one later?

In a competitive real estate market where houses are often being sold with multiple offers, it is difficult for a buyer who already has a home to decide what to do in order to compete with the other buyers’ offers. Lets face the reality that if several buyers want a home and one of them says to the owner “ you will have to wait for me to sell my current home before I can purchase yours…” that buyer’s offer probably will not be chosen.

Often, if you want to move to another house the simplest thing to do financially is sell your current home first. This would be in my opinion probably one of the easiest choices given a market where your house could be sold at a price where you would be taking a financial gain from the sale of the house. This decision should be made only of after subtracting selling costs and possible capital gains taxes. A real estate agent and escrow officer can provide you with an estimate of the seller costs and profits prepared on a “real estate seller net sheet.”

Selling a home would free you financially from the responsibility of having your name remain on the mortgage of your current home while trying to purchase another one. Depending on your financial qualifications this can increase your debt to income ration and possibly cause you to have to take your new mortgage at a higher interest rate, assuming you can qualify to carry both houses. Likewise, you could be responsible for two mortgages that may become a financial strain if you buy and move to another house unless you can pay “all cash.”

If, after careful research you decide that based on a high demand for houses such as yours that it will sell fast, it is possible to take a “bridge” mortgage loan and purchase your replacement home while your current home is on the market. At times this can be a wise decision if your replacement home is found quickly and you would prefer to not make a “double move.”

If you are considering buying your new home first, possibly with a bridge loan and then selling off your current home, it is very important to consult with a real estate agent to get an estimate of the time it would take to sell your home given the current local market conditions. You would need to know at what price the home could be expected to sell and in how long a time period. A good experienced agent should be able to collect and properly analyze such data to help you make an accurate determination. Buying and possibly closing escrow on the replacement home should only be considered if you are fairly certain that your home will sell within a reasonable time and for an acceptable price.

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