THE HOUSE BUYING DILEMMA
This house buying dilemma is a lot like that old question, which came first – the chicken or the egg? When you’re ready to move, should you sell your current home first? Or, should you first place a contract on the new home you want to buy? And, the correct answer… it depends on current market conditions and your financial situation.
If you find your dream home first and make an offer, you have to make some hard choices. First, do you need to sell your current home before you can close on this new home? Or, do you have the financial funding to close on this dream home until your current home sells?
If you close on the new home first, you may have to pay both mortgage payments until the current one sells. You have to decide if that’s financially feasible for your family.
Finding your Dream Home First …
If you make an offer on a new home and you’re selling your home, your offer may need to include some contingencies. Your official offer may state that closing on the new home is contingent on the sale of your current home. However, that can create another dilemma. If someone else makes an offer on your dream home that can close immediately, you have the option to close on the property right away rather than waiting for your home to sell. If you can’t close immediately, you could lose the chance to buy your dream home. Another option could be to rent your home for a short time while you continue to market it for sale.
For our second home purchase, we found a home we loved, but we had not been pre-qualified for our mortgage. We spent the next week working through that process. By the time we made an offer, the homeowner had already accepted an offer which was contingent on another home selling. We made our offer with mortgage ready to go and ready to close. The folks who had made the original offer were given seven days to close, but they were unable to, so we closed our dream home immediately.
Selling Your Current Home First …
If you receive an offer on your house first, then you have time to look for your dream home. While the person buying your current home works through the inspection period and finalizes their mortgage, hopefully you’ll find exactly what you want at the same time. If you don’t find the perfect home before the closing on your current home, you again have some hard choices to make.
You could ask the buyer to allow you more time to move out, of course, with you paying rent to them. Most buyers are ready to move in, so this may not be an available option. You could move to a temporary home or storage, while you continue looking for a dream home. Or you could settle for a home that meets most of your needs – that’s just not a great solution.
Which would you do and why? I would encourage you to get your mortgage pre-qualified and your house well on the way to being sold before you find your dream home.