Strategies to Move-up and Downsize

If you currently own a home, buying another home is more complicated. Here are several strategies you can take to transition to a new home.

Buy First and then Sell

The first strategy is the simplest. Shop around and purchase a new home that best meets your needs. Move-in and then sell your current home. This approach allows you to get the best out of your home purchase and home sale, but you must be financially able to have two properties for a period of time.

 

Pros

  

 
  • Be patient and buy the best home that meets your needs since you are under no pressure to sell.
  • As a clean, non-contingent offer, you'll negotiate the best deal on the purchase.
  • You are positioned to get the best deal on the sale of your current home.
  • Move once avoiding the cost and inconvenience of a double-move.
  
 

Cons

  
 
  • Maintaining two mortgages for a period of time will incur additional cost.
  • You must qualify to purchase the new home while maintaining your current home.
  

Sell First and then Buy

Sell your home, move in to temporary housing or move-in with family. When you find your ideal home, buy it and then move-in. This approach has the same financial benefits of the previous approach, but it is the most inconvenient since it requires a double-move.

 

Pros

  
 
  • Be patient and get the best deal on the sale of your home.
  • You're positioned to get the best deal on a purchase.
  • Financially, this can be the most conservative approach eliminating the possibility of holding two mortgages.
  
 

Cons

  
 
  • Additional cost and hassle that comes with a double-move.
  

Buy with a Home Sale Contingency

With this approach you agree to purchase a home from a seller, but only if you are able to sell your existing home. In addition to the terms of the purchase - price, settlement date, etc. - you'll specify the maximum asking price for your home and how much time you have to sell it. This approach would appear to combine the best of the previous approaches and eliminate a double-move and the possibility of having two mortgages. But there are significant challenges with this strategy.

 

Pros

  
 
  • You'll only purchase your new home if you sell your current home eliminating having two mortgages.
  • Move once eliminating the cost and inconvenience of a double-move and temporary housing.
  
 

Cons

  
 
  • It's difficult to negotiate the best price on a purchase since you require such favorable terms.
  • Especially in hot sellers' markets, many homeowners simply won't consider a contingent contract which can eliminate many homes that meet your needs.
  • It's difficult to negotiate the best price on your home sale since you're under pressure to obtain a contract quickly.
  • Pressure and stress for both transactions can be very high.
  • High risk since any single issue with any party can unravel both sales.
  

Mix and Match with a More Refined Strategy

Buy Non-Contingent with a Long Settlement

If you can afford to buy without selling but want to minimize or eliminate a double mortgage, go ahead and get your home ready to sell. Find your new home and negotiate a non-contingent offer with a longer settlement date – say 45 to 60 days. Immediately put your home on the market and price it aggressively. Negotiate settlement terms that allow you to close on the sale of your home, buy and then move reducing or eliminating having two mortgages and avoiding a double-move. Since you’ll need to buy without selling, be prepared to carry two mortgages ‘just in case’.

Buy Contingent Upon Settling on Your Home

A twist on a home sale contingency is to get a contract on your home then negotiate a purchase that’s only contingent upon closing on your sale. These are much easier to negotiate with sellers than a home sale contingency. With this approach, you must be prepared for a double-move if you find a buyer for your home, but haven't yet finalized the purchase of a new home.

Buyers Guide