To Buy or Sell First?

If you already own a home and are looking for a new one, you’re faced with a challenging question: should you sell your current home before you buy your new one, or vice-versa? To help make this decision, consider the following three factors:

1) Market conditions. You may have heard terms such as "seller's" or "buyer's" market. However, when you sell and buy homes, you must consider the housing market for your given neighborhood, house style, and price. Work with a professional Realtor to get an idea of how long your home should sit on the market, and about how long it should take you to find what exactly you are looking for. Use online resources such as Realtor.com to see how common homes are that meet your criteria. 

2) Finances. Many people need the equity from selling their current home to put towards the down payment on their new home. So what do you do while transitioning? You could stay with friends or family, or temporarily move into a rental unit (this may require you to rent a storage unit, as well). Alternatively, you can rent your home from your buyers in order to give you more time. The rent-back term is only valid for a maximum of 60 days, as a longer lease would categorize the home as income property. Lenders may be able to help you by granting you a bridge loan. The drawback to selling your home before you buy another is that you may feel rushed if you are unable to find a home you like in a reasonable amount of time.

3) Risk Aversion. Would you rather be stuck with nowhere to live, or with two mortgages? Regardless, Realtor.com advises homeowners to have a backup plan—for example, an alternative source of income or a place to stay should you sell your home sooner than expected.