If you’re a homeowner looking to move, you face one of the biggest dilemmas in real estate: Should you sell your current home before buying your next one, or buy your next home before selling your current one?
Each strategy has its own risks and benefits, and the best choice depends on market conditions, your financial situation, and how much risk you’re willing to take. In this post, we’ll break down the pros and cons of both approaches and explore financing options like contingent offers, bridge loans, and short-term rentals to help you make the best decision.
Option 1: Sell Before You Buy
Selling your current home before buying a new one is often the safest financial route, but it comes with its own challenges.
Pros of Selling First
✅ Know Your Budget – When you sell first, you’ll know exactly how much money you have to work with for your next home. This prevents you from overextending your budget.
✅ Stronger Buying Power – A buyer who isn’t waiting on their home to sell is more attractive to sellers. You can submit a non-contingent offer, which is more likely to be accepted, especially in a competitive market.
✅ No Risk of Two Mortgages – You won’t have to worry about paying two mortgage payments at the same time or scrambling to cover costs if your first home doesn’t sell quickly.
✅ Avoid Bridge Loans or Contingencies – You can skip complex financing tools like bridge loans (short-term loans that cover the gap between buying and selling) and home sale contingencies (which make your purchase dependent on selling your current home first).
Cons of Selling First
❌ Finding Temporary Housing – Unless you can do a perfectly timed back-to-back closing, you might need to rent short-term, stay with family, or find a temporary solution while searching for your new home.
❌ Market Fluctuations – If prices rise while you’re between homes, you might end up paying more for your next home than you originally expected.
❌ Pressure to Buy Quickly – Once you’ve sold, you may feel rushed to buy a new home, which could lead to settling for a less-than-ideal home just to avoid being in limbo.
Woman Holding a Box Outside a Portable Storage Unit
Financing Solutions for Selling First
If you decide to sell before buying, you may need to arrange temporary housing or storage solutions:
🔹 Short-Term Rentals – Renting a furnished apartment or home for a few months gives you flexibility, but short-term leases can be expensive.
🔹 Rent-Back Agreement – In some cases, you can negotiate with your buyer to rent your old home for a short period after closing, giving you more time to find a new place.
🔹 Storage Units or PODS – If you need to store furniture while between homes, consider a portable storage unit that can be delivered when you move into your next home.
Option 2: Buy Before You Sell
Buying your new home before selling your current one can be appealing because it allows for a seamless transition, but it carries more financial risk.
Pros of Buying First
✅ No Need for Temporary Housing – You can move directly from your old home into your new one without needing to rent, store belongings, or live with family.
✅ Time to Find the Perfect Home – You won’t feel rushed into buying a home you don’t love. You can wait for the right property to come along without the pressure of already having sold your home.
✅ Easier Moving Process – Since you’ll already own your next home, you can take your time packing and moving without worrying about strict deadlines.
Cons of Buying First
❌ Managing Two Mortgages – Unless your current home sells quickly, you may need to cover two mortgage payments, taxes, insurance, and maintenance costs for an extended period.
❌ Risk of Not Selling Quickly – If your current home doesn’t sell as fast as expected, you could find yourself stuck carrying two properties for longer than you planned.
❌ Financing Challenges – Qualifying for a second mortgage while still owning your first home can be difficult. Lenders may be hesitant to approve a loan if your debt-to-income ratio is too high.
Home For Rent
Financing Solutions for Buying First
If you want to buy before selling but don’t have enough cash to do it comfortably, consider these financing options:
🔹 Bridge Loans – A short-term loan that covers the gap between buying a new home and selling your current one. While convenient, they often come with higher interest rates and fees.
🔹 Home Equity Line of Credit (HELOC) – If you have significant equity in your current home, you can take out a HELOC to use as a down payment on your next home. However, this adds another loan that needs to be paid off when your current home sells.
🔹 Contingent Offers – You can make an offer on a new home that is contingent on selling your current home first. However, sellers in competitive markets often reject contingent offers in favor of buyers who can close without waiting.
🔹 Lease Your Current Home – If you can afford it, you could rent out your old home until you’re ready to sell. This can provide income to offset your mortgage while giving you time to find the right buyer.
Bridge Loan
Which Strategy is Best for You?
Your decision should be based on your market, finances, and personal risk tolerance.
When to Sell Before Buying:
- You need the proceeds from your home sale to afford your next home.
- You don’t want the risk of carrying two mortgages.
- You’re in a buyer’s market, where selling a home may take longer.
- You’re relocating to a different area and don’t want to rush into a purchase.
When to Buy Before Selling:
- You have the financial ability to cover both mortgages (even temporarily).
- You’re in a hot seller’s market, where homes sell fast, making it less risky.
- You don’t want the hassle of finding temporary housing.
- You’ve already found your dream home and don’t want to risk losing it.
Final Thoughts
Both approaches have their pros and cons, and what works best for you will depend on your financial stability, housing market conditions, and how much risk you’re comfortable taking.
If you’re unsure, work with a real estate professional to assess your situation. An experienced agent can help you navigate contingent offers, negotiate rent-back agreements, and explore creative financing solutions to make the process as smooth as possible.
Still Not Sure What’s Right for You?
Contact The Cameron Team today! We’ll help you evaluate your options and create a personalized strategy to buy and sell with confidence.
Should You Sell Before You Buy, or Buy Before You Sell?
