This post goes out to a friend. I actually get asked this question quite often, as many of my clients are upgrading and not just buying for the first time. If you already own a home and want to buy another you have a few options.
The easiest option, if you are super rich and have loads of cash, is to just buy the new one and either rent the old one or burn it down. Most of us don’t have that kind of cash and would probably not burn down their home anyway, so let’s skip that one. The majority of folks have 3 real options.
Option 1: Put your house on the market and start looking for a new home immediately. This is honestly the best approach. I say that because nothing in real estate turns on a dime. Finding a home and marketing a home both take time. It takes a minimum of 30 days to get a loan approved, so if you get a contract on your home or put a contract on a new home, odds are you’ll be waiting at least 30 days to get your paperwork in order. The downside is that you are doing a lot at the same time, and it can be somewhat consuming. You also, in most cases, will have to sell your home in order to buy a new one. That means your purchase contract will contain a home sale contingency, which most sellers dislike and some will not accept.
A home sale contingency is a simple form that makes the purchase contract dependent on the sale of the home. What that means to you is if the purchase of your home falls through then you can back out of your purchase without penalty. You may still lose some money because you paid for a home inspection or appraisal, but at least you will get your deposit back.
Option 2: Get a contract on your home and then start looking for a new home. I’ve had two clients do this, and I can honestly say it is a horrible way to go. The pressure to move once you have a contract on your house is ridiculous. I’m not talking about pressure from the buyer. I’m talking about the pressure you put on yourself by feeling like you don’t have a place to live! The upside is that your home sale contingency will be easy since you already have a contract on your home. However, both families who did it that way swore they would never do it again.
Option 3: Buy a new home and then put your house on the market. This is a worse option than the second for several reasons. First, if you have to sell your home in order to buy the new one then the seller is not going to wait for you to get a contract. As I mentioned before, most folks are very circumspect about accepting a contract with a home sale contingency.
The most difficult part about negotiating this sort of thing is making the dates line up. This is where your agent’s experience and ability to communicate well are critical. However, with the proper attention to detail and good communication all around then things will move smoothly and you will be able to close on both homes the same day.
Posted on February 2, 2011 at 10:05 am by Ray Nelson