Homeowners: Do you Sell First and then Buy, or Buy First and then Sell?
Westcoe Realtors, Riverside Ca… Given the very active status of our current real estate market, and the (depending on your price range) limited housing inventory available, the question posed above is one every existing homeowner wants to know. If the goal of a seller is to simply move from their existing home into another home that is either bigger or smaller, has more or less yard, pool/no pool, closer to work, etc. then what comes first…selling, or buying? Chicken or the egg? Well, let us see if we can help a bit with that.
First…it’s almost impossible to buy first and then put your home on the market. In a real estate market that is busy and active, very few sellers will even consider an offer from a buyer who has a house to sell that is not currently in escrow. Think about it…you are asking the sellers to take their their home off the market and hope that you can sell yours. You can’t give them a close of escrow date and what if yours doesn’t sell at all?
While waiting for you, they might miss a buyer who CAN be definite about closing and price, so almost 100% of the time, if you make an offer without first having your home in escrow, the seller will reject your offer and ask you to come back when you can be more solid with the details.
So…that leaves selling before you buy…but with protections so you are not stuck without a home. The far better way to coordinate the sale and purchase is with the sale of your home first…but be sure that your listing agreement and purchase contract contain wording similar to the following: “Seller accepts this offer subject to entering escrow on another home within _____ (fill in the blank) days, with both escrows to close as concurrently as possible.”
This clause lets your potential buyer know that you still need to find another home to live in, and that once you do, then both escrows must close together…and if for some reason the new purchase fails to close, then you are not obligated to close your existing home.
However, there are few other things here that can complicate matters.
First, don’t expect your buyer to give you an unlimited amount of time (the fill in the blank part) to find another home. You can probably buy yourself 2 weeks, and if your house is really special and the buyer really wants it (multiple offers, for example), you may be able to expand that time frame to 4 weeks, but no buyer is just going to wait indefinitely for you to find another home.
Which means secondly, you (the seller) better have a pretty good idea what you want, and where you want it. Hopefully, you have been looking around as well, getting ready for this exact moment. If so, then you have a better chance of finding your new home in the time frame you negotiated with your buyer.
What happens if you don’t find a new home within this 2-4 week period? Well, all bets are off on the original offer, and the buyer can either give you more time, or they bail and purchase something else, which means your home is back on the market for sale, and you start the process all over again.
Lastly, hopefully the home you find to purchase does not have as a seller someone who is doing the same thing you are. While stacking two homes like dominoes happens all the time, coordinating 3 closings and subsequent move dates gets pretty tricky…any more than that, and real estate chaos is right around the corner!
Every situation is different, and certainly there are nuances that can affect some of the above details, but in general, this is how it’s done in our current market, where the seller holds more cards than the buyer. As an FYI, we have seen markets where the reverse is true…the seller would gladly take a buyers offer and give them all the time they need to sell, but that’s not where we are right now. Remember, real estate markets swing like a pendulum, and at this moment, the pendulum is more in the sellers side of the equation.
Hope this helps, and feel free to call us if you have any questions about what can be a tricky subject.