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Pitfalls of Buying Before Selling

I always buy before I sell. I can't seem to help myself! Call it a downside to the job, I see A LOT of homes and it's hard to not to fall in love with a different one every year or so.

This is definitely one of those "Do as I say, not as I do" times.

Despite my questionable personal home-buying background; it is my obligation to offer all my clients sensible and solid advice. 

And that advice is: Do not buy before you sell. Full Stop. Nope - not even just this one time. 

Purchasing a home prior to selling inevitably leads to stress, potential financial loss, and often a lower sale price on the existing home. Why is that, you ask? The reason is that the people who purchased prior to selling must discharge their existing mortgage before having the resources for the new one to fund. If they haven't secured financing to carry two mortgages with their bank they may not be in a position to complete on their purchase and could lose their deposit and also find themselves in breach of contract. Even if they are approved for two mortgages, they will only live in one house and be facing huge financial obligations in maintaining the 2nd mortgage for a home they no longer live in.
But it's alright in a busy market, right?

Again... No! Usually this situation comes up most often in an active market when homeowners are certain that their old home is going to sell, no problem. But what happens when something goes wrong? The current home may not be worth what the sellers thought, the market may take a dip and sales could slow down with little or no warning, or a sudden spike in inventory offers buyers lots of options for purchase and selling pressures increase. Now what?

If these people are already committed to following through on a purchase, their only option may be to drastically lower the price of their home, and in some cases, well below the market value simply to bring about sale. At the end of the day they walk away with less than they would have if they listed without the pressure of another financial commitment. 

You know you want to love your Realtor.

The stress of having a home on the market that isn't selling is horrible at the best of times, when you have a home on the market that hasn't sold but you MUST get it sold as you have already purchased, that kind of stress leads to premature aging, excessive wine drinking, and marital disharmony. It also often leads to hatred of your Realtor - and nobody wants that!

Be Strong. Resist.

I know it's tempting to jump on the perfect home when you see it. It's exciting and you can't imagine losing that ideal home. I completely understand. However, finding the perfect home may simply be a sign that you are ready to move and it's time to meet with a Realtor who can advise you on the sale of your current home. Once you are listed, there's lots of time to shop and who knows, if you sell quickly, enough that perfect home may still be waiting for you.

UPDATE FEB 2021: As the market changes, there is one exception to this rule. In a *very hot* market when      properties are selling in hours - one may be able wait for a successful purchase before putting their house on the market. Like always, talk to your realtor for the best, most professional advice.