Typical Approach
Selling first is considered optimal because it frees up your equity and more precisely helps determine how much you can afford to spend on your next home. This tactic also helps relieve some of the stresses associated with a dual transaction. Many home seller / buyers need the equity that’s tied up in their current home for the purchase of their next home. Once that home is sold, you’ll become a powerful homebuyer because the sale may leave you with a substantial down payment and plenty of cash for closing costs. Being in this financial position typically will afford you the most favorable financing terms and a stronger buying position – home sellers prefer serious homebuyers who have proven that they have the funds necessary to close on the home purchase transaction.

Another Option
Another way to capitalize on your current home’s equity is to take a bridge loan, a short- term loan that bridges the gap between the sale of your current home and the purchase of your new home. The process is straightforward: the mortgage loan you use to purchase a new home will use your old home as collateral. In order to qualify for a bridge loan, you must have an income that can cover the cost of the two simultaneous mortgages. A bridge loan can be a useful tool for buyers who plan on selling but who need financial flexibility in a hot housing market. Looking at things from a seller’s perspective, it’s simply less stressful to sell before buying. Finding the perfect next home and the perfect homebuyer to purchase your current home and timing concurrent closings is possible ... it does happen. But for some home sellers, it’s simply too stressful to coordinate the optimal timelines, as the pressure to do so could creep into either or both transactions and result in some rushed decisions.

Other Considerations
Selling first does have its drawbacks. If your current home sells before you find or close on your next home, you may have to rent in the interim and this means moving at least twice. While this isn’t an optimal situation, it may be better than making rushed and poorly thought out decisions regarding the purchase of your next home. Some home sellers can circumvent interim living issues by negotiating a sale-leaseback deal. In this case, the homebuyer allows you to remain in the house for a specific amount of time for a specific fee. The terms of these deals are negotiable. Your Realtor will know whether it’s reasonable, given market conditions and other relevant factors, to include a sale-leaseback contingency in your sale contract.