Many people are looking at real estate prices and thinking it's a great time to buy. And they are right. The problem is - they may need to sell their home first to complete their downpayment, and in a buyer's market, this sometimes can be a challenge.
It is important that you sit down with your REALTOR® and explore all the options available to you. Here are some of them:
- Buy first, sell later. Advantages: You can take advantage of current buying opportunities and low interest rates. Disadvantages: You may not qualify for both loans, and if you do, you may have to pay two mortgages until your old home sells. You may also explore the availability of a "bridge" loan from your lender to help you make the transition.
- Sell first, buy later. Advantages: This is the "safest" option, you only have one mortgage at a time, you have no uncertainties. Disadvantages: It may take a while to sell your current home and you may miss out on market opportunities and low interest rates.
- Buy first, conditional upon the sale of your existing home. Advantages: This poses little risk to you, if you don't sell , you can get out of the purchase contract. Disadvantages: Many sellers may be reluctant to accept such a contingency. If they accept this condition, they will probably demand the home be listed with a professional agent, priced right, and will give you a deadline to sell your home. It may be very frustrating if you really like the new home but you cannot sell your current home on time.
The most important considerations to take into account to make a strategic decision of this sort are: 1) Your financial capabilities; 2) Your apetite for risk; and 3) The urgency you may have to trade your home.