Should I Sell First & Then Buy, Or Vice-Versa?

By Shayne Bowen

The decision you need to make is this: Decide whether you want to sell your home first and then buy a new one, or vice versa.

This decision is quite important. Far too many times I've seen clients make unfortunate decisions and waste significant sums of money due to making an ill-advised decision on this question.

There are pros and cons regarding which to do first.

However, it's unequivocally true that the clients who are most experienced in real estate virtually always sell their current home first, and then buy a new one.

The most experienced buyers sell their current homes before buying a new one. But they do so with a "release clause" that allows them to CANCEL the escrow on their current home if they are not successful at locating a suitable new home.

By doing it this way, they are able to get the best of both worlds:

• They often save $5,000 to $10,000 (or more) on the purchase of the new home. The reason: the seller of the new home takes them seriously, because they are ready and able to perform. They already have their current property "sold."
  
  
• They have a complete selection of new homes. By doing it this way, the experienced buyer can choose from virtually all the homes currently for sale.
  
  Conversely, if their current home is not already in escrow, 30%-50% of home sellers either won't consider an offer from them, or would do so only with less favorable terms and a higher purchase price than would otherwise be the case.
  
  
• They have complete protection from "being out on the street" without a home.
  
  We write into the  sales contract on your current property the following words:
  
  "This transaction is contingent upon the seller closing escrow on a suitable replacement home."
  
  Bottom line: If you don't find a suitable replacement home, even though your current home is already in escrow, we can legally cancel the sale on your current property. This means you won't be out on the street without a home - even if you don't find a suitable replacement property after your current property goes into escrow.
  
  
• They know the financial numbers that are involved, because they already have their current property in escrow.

  Knowing what I know (after over two decades in the real estate business) if I were making a move I would personally do this the same way as described above: sell my current property first - with a release clause in case I couldn't locate a suitable replacement property.

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  Clients who don't follow this process all too often experience some significant negative consequences:
  

  • They experience a significant emotional let down when the seller of the home that they are buying cancels the sale via a "release clause." Sellers virtually always have a provision in their sales agreement (a "release clause)" that states that they may cancel the agreement if they find a "cash" buyer - one that can perform without selling another property.
    
    
  • They are unsure of the financial numbers involved, because they don't know how much they are going to get out of their current property.
    
    
  • They often waste up to $1,000 on a termite report, contractor's report, appraisal, and other reports, only to find out that they didn't get the property because the seller finds a "cash" buyer, thereby cancelling the sale.
    
    
  • They all too often sell their current property for less than they could have gotten for it, because they are in a rush to avoid losing their "new" home to a "cash" buyer.

I've applied the steps above in my own real estate purchases. They work, and they are the smart way to go.