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Buy 1st or Sell 1st …THAT is the Question!

by Joe Montenigro on October 17, 2010 · 0 comments
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Let’s say that you own a home but want to move to a better home.   Most people start the process by looking for the new home first… and then it hits them…. how am i going to pay for this thing?!    For the sake of brevity, let’s say you don’t want to rent your current home and that you have some cash/savings for a down payment but not enough to buy the new house outright with no mortgage.   small house

So, if you want to buy the new home FIRST, you must qualify for the new mortgage while you still have a mortgage on your current home… that’s tough for most people.   Also, you run the risk of making two mortgage payments while waiting for your old house to sell… that can be a little scary because the potential for loss is almost unlimited.   The advantage of buying first is that you know exactly where your moving to, when your moving, the cost of the new house and best of all, you can move right away. 

On the other hand, if you don’t qualify for two mortgages at once, don’t have the cash for a down payment on the new house or if the risk of carrying two mortgage payment makes you nauseous, then Selling first is often the default choice.     The downside here is that you can’t really buy until you sell first and what if you can’t find something that you like?   It sounds crazy to even think about selling without knowing where your going, right?   It really is a leap of faith and the truth is you may have to find temporary housing if you can’t find something you like in a reasonable time frame….yes, that means moving twice, once into the temporary housing and again into your new home… not fun.    Although it’s a hassle, it’s a lot less risky than having two mortgage payments and you can minimize the possibility of having to move twice by carefully negotiating the terms and dates in your sales contracts.

Of course, this example is way over simplified.   Every one’s situation and tolerance for risk is slightly different which is why I ask a lot questions with new clients, getting to know them and their preferences so I can give them the best advice and guidance.    It’s helpful if the client has already given some thought to the issue.   Moving up can be tricky, but a little discussion and planning will be time well spent.   If you live in South Jersey and you have a specific question about your situation, post your comment below or email me directly, please include the property address.

Thanks for Reading!!
Joe

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