Housing market fluctuates, going up and down periodically. Buyers and sellers
should adjust their strategy to present conditions to make it as smooth as possible.
Should I Buy or Sell First
If you are already a home owner who wants to buy a new house you will usually face 'buy or sell first' dilemma :
You may have no house to live in if you sell first
Buying and selling at the same time would be the best case scenario, but it is rather unlikely.
You can reduce the cost of your transition between two homes by having more insight into how the real estate market works. This knowledge will help you decide on what you should do first.
You may carry two homes and mortgages when you buy first
||Buyer's market is slow - there are more homes for sale than buyers. Oversupply of homes drives prices down and it takes longer to sell a house. In this market you should focus on selling first which is much more difficult than buying.
Most likely you will have to drop your asking price. At the same time, it's easier to negotiate a better deal for a new house.
||By selling first you can avoid a trouble of paying expenses for two homes until you sell. Further, you will have the proceeds from the sale of your house to buy another one.|
||You can make your offer to purchase a new house conditional on selling your existing house. Although a conditional offer is less attractive to sellers it may have a better acceptance when it's hard to sell.|
||There are more buyers than homes available for sale. Prices are higher and homes tend to sell quickly due to a strong demand. You may be able to get a higher price and better terms. On the other hand, you will have to compete with others when buying your new house.
||You should buy a house first since it is the tough part of 'buying and selling' in seller's market conditions. |
||Offer to purchase a new house conditional on the sale of existing home will have little chance to succeed. Sellers are most likely to reject it because they can easily find another buyer with a firm, unconditional offer.|
||If you haven't sold your current house yet and don't have money for your down payment you can ask
your lender for bridge financing. This short term, fixed rate loan (which can be prepaid at any time without a penalty) will let you buy your new home first and sell the old one later.
||This financing will increase your cost of buying a new house. You will be paying interest and installments on your bridge loan until you are able to repay it all from proceeds received upon selling your old house.
||Bridge financing is safe and makes sense in the seller's market when the odds of selling your old house quickly are high.|
||Avoid buying first in the buyer's market, when sales are slow. When your house doesn't sell for months, or you have to chop the asking price, or it doesn't sell at all you may find yourself in a dangerous spiral of debt.|
||Housing market is also affected by seasonal fluctuations in demand. It invigorates in the spring and slows down in the winter.|
||You can increase the odds of selling fast and at the best price by listing your house in the beginning of spring.|
How to price a house
Beware of the wrong price - effective sale depends very much on the right pricing.
It is in your best interest to match your price with the actual market value of the house
in a particular location.
Realistically priced properties have the best chance to sell within
reasonable time and close to what sellers ask for.
Don't assume that a higher asking price will net you a higher selling price
An overpriced home may not sell for a
Avoid expensive renovations which will inflate
your price above the market value in your
Your price strategy should reflect current
conditions of the market
Make your price responsive to seasonal
If your house hasn't been appraised ask your
agent to help you determine its fair market
Research prices in your area to make sure
your agent's estimate is correct
Have your house appraised if you are selling on your own