The Buy-Sell Dilemma

Should I buy first or sell first?  This is a common question most sellers ask.

Wondering how to make the jump from one house to the next without owning two simultaneously–or, perhaps worse yet, owning none at all? You’re not alone. Most people either make offers to buy first, then hope for a quick sale of their existing houses, or put their houses on the market, then find new housing before escrow closes.

The primary advantage of buying first is the ability to shop for the new house and feel completely secure in that decision before putting the current house on the market. To avoid risk make the purchase escrow contingent on the sale of the current house. However, it’s difficult sometimes to find a seller willing to accept such an offer unless the buyer’s own house is already in escrow, or the seller simply is in no hurry to move.

Some sellers will consider this if there is an escape clause that gives the seller the right to continue marketing the house and requires the buyer either to walk away from the transaction or to waive the contingency if the seller receives another acceptable offer. The seller will say: I will take your offer, but I am going to leave my house on the market. In the event that I receive another offer that is acceptable, I will give you, for example, 48 hours to remove the contingency, at which time you will have to either buy the home before your home is sold or lose the home to the next buyer and start looking again.

On the flip side, the primary advantage of selling first is a negotiating position of maximum strength on the sales transaction because there’s no pressure to sell quickly.  Many times, people list their home for sale, then start looking at a home to buy. If they don’t find anything because the home they are looking for is special, unique or tough to find. Then they decide to rent for a while. That requires a double move, which is not always the ideal situation.

A way to avoid the temporary housing scene is to make the sale of the current house contingent on finding a replacement home to purchase. People buy homes that are sold contingent on the seller’s buying another house. The only problem is that it puts the buyers in limbo because they don’t know whether the person they purchased the home from is ever going to find a house to buy.

This strategy is most likely to succeed if the market is quite strong, the seller’s house is truly a rare find, the price and terms are highly favorable for the buyer or the buyer is in no hurry. Selling subject to finding another house puts the seller in a good position because the burden of uncertainty falls on the buyer.

Sometimes the seller will decide to rent a residence, live with a roommate, occupying corporate housing, move in with family or friends, or camp in a hotel room until a suitable house is purchased. These short-term living arrangements could be uncomfortable, inconvenient and expensive. It’s not uncommon for personal circumstances to dictate how homeowners resolve the buy-sell dilemma.

Beyond personal circumstances, a final consideration should be the state of the local housing markets. A low inventory of homes for sale and demand among buyers tilts the balance toward making a purchase offer first, then putting the house on the market. Conversely, a large inventory of houses on the market and a scarcity of buyers points toward putting the house on the market, then shopping for a replacement.

The other issue worth considering is whether houses are appreciating or declining in market value. If prices are headed up, buying first makes sense. If prices are headed down, selling first is smart.

Whether to accept a contingent offer, buy first then get your home sold, or sell first –all that comes back to what’s happening in the market and what works best for you!

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