How to Buy a New Home Before You Sell (Subject to Sale Offers)

How to Buy a Home Before You Sell: A Guide for Subject to Sale Offers

If you're a current homeowner looking to make a move, one of the biggest questions you might be asking yourself is whether you should buy a new home first or sell your current one. This is a common dilemma for homeowners, and the answer is not always straightforward. The right decision depends on a number of factors, including the current real estate market, your financial situation, and your risk tolerance.

In this post, we'll break down the factors you need to consider when deciding whether to buy or sell first. We’ll also introduce a third option: doing both simultaneously using a subject-to-sale offer. By the end of this post, you’ll have a clearer idea of which strategy works best for you.

The Market Matters: Buying in an Uptrending Market vs. Selling in a Downtrending Market

Typically, in a rising market, it makes more sense to buy first. Why? Because as prices rise, you’ll want to secure your new home at a lower price today rather than paying more in the future. Additionally, by the time you sell your current home, it’s likely that the market will have continued to trend upwards, meaning you’ll be able to sell at a higher price later on.

On the other hand, in a downtrending market, you’ll want to sell first. This strategy ensures you get the highest possible price for your current home. After selling, you can then wait for prices to drop further, allowing you to buy a new home at a lower price. Selling first also ensures you know exactly what your budget is for your next purchase, avoiding any financial surprises.

However, markets don’t always move predictably, and each homeowner's situation is unique. Let’s take a deeper look at the pros and cons of each approach.

Pros and Cons of Buying First

Advantages of Buying First:

1. Flexibility: If you buy before selling, you have more flexibility in your timeline. You won’t feel rushed to find a new home after selling your current one.
2. No Missed Opportunities: You can act immediately if your dream home hits the market. You won’t risk losing out because you’re waiting to sell.
3. Less Pressure on Timing: If you haven’t sold yet, you can be more relaxed about finding the perfect home rather than making a rushed decision.

Disadvantages of Buying First:

1. Uncertainty in Selling: You don’t know for sure how much your current home will sell for or if it will sell quickly. This could lead to financial strain if your home doesn’t sell in time.
2. Financial Risk: Buying first may mean carrying two mortgages at once or relying on bridge financing to cover the gap, which can be costly and stressful.

Pros and Cons of Selling First

Advantages of Selling First:

1. Know Your Budget: Once your home is sold, you know exactly how much money you have to work with, making it easier to set a realistic budget for your next home.
2. Less Financial Risk: Selling first eliminates the risk of carrying two mortgages. You won’t have to rely on bridge financing or other costly short-term solutions.
3. Easier Negotiation: When you sell first, you can make stronger offers on new properties without needing a "subject to sale" clause, making your offer more attractive to sellers.

Disadvantages of Selling First:

1. Limited Options: If your dream home comes on the market before your current home sells, you may not be able to make an offer in time.
2. Moving Twice: If you can’t find a new home immediately after selling, you may need to find temporary housing, which could be inconvenient and expensive.

A Third Option: Buying and Selling Simultaneously with a Subject-to-Sale Offer

If you’re looking to minimize the risks of buying and selling at the same time, you can consider a subject-to-sale offer. This strategy allows you to make an offer on a new home, contingent upon the sale of your current home by a certain date. Here’s how it works:

Advantages of a Subject-to-Sale Offer:

• Align Your Timelines: A subject-to-sale offer helps you line up the sale of your current home with the purchase of your new one, reducing the chances of needing to move twice or take out bridge financing.
• No Rush: You can secure a new home while taking your time to sell your current property, avoiding the panic of being "homeless" in between.

Disadvantages of a Subject-to-Sale Offer:

• Less Attractive to Sellers: Sellers may be hesitant to accept a subject-to-sale offer because it ties up their home for an extended period, with no guarantee that your home will sell. This means you may need to offer close to or even above the asking price to make your offer competitive.
• Bump Clause Risk: A subject-to-sale offer often comes with a bump clause, which allows the seller to accept a backup offer from another buyer. If a more attractive offer comes in, you could lose out unless you remove your subject to sale condition within 24–72 hours.

Final Verdict: What’s the Best Option?

While a subject-to-sale offer can work in certain situations, it does come with its own risks and challenges. In a hot market where homes are selling quickly, I often advise clients to sell first. This eliminates the stress of trying to sell a home while also managing a purchase, especially when prices are fluctuating. Selling first means you know exactly what you can spend and can make stronger offers when the right property comes along.

However, in a fast-moving market where home prices are rising rapidly, you may want to buy first if you’re confident your home will sell quickly. This allows you to secure your next home before prices rise further.

Ultimately, the right choice depends on your personal situation, the state of the market, and your comfort level with financial risk.

Need More Help Deciding?

Still unsure whether to buy or sell first? Let’s chat! I can provide personalized advice based on your unique situation and the current market conditions in your area. Scroll down and click the link below to book a call with me at a time that’s convenient for you.

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