This is like the chicken and the egg scenario for most people but if you’re in the real estate industry the answer is pretty cut and dry. The best way to answer this is from a seller’s perspective. So lets look at it from that point of view.
Most people want to be able to find a new home first and then list their home for sale. Lets face it, its way more fun to look at houses online than to get your house ready to sell. The issue with this approach is that many sellers may not be willing to wait for you to sell your home before you buy theirs.
Note: When a buyer must sell their house BEFORE they are financially able to purchase a new property they need to disclose it in the contract. This puts a home sale contingency into the contract. This means that if the sale of their house falls through they can cancel the contract for purchasing your house.
Let’s Look At It From The Seller’s Perspective
In this scenario, you’re going to be the seller. Lets look at 5 different types of buyers. Let’s assume you’ve gotten 5 offers (wow!) and that each offer is the same price and the buyers are equally qualified. The only difference is whether or not the buyers have a house to sell.
Buyer 1 – is currently renting and has no house to sell. This buyer can purchase the house without a home sale contingency. This is usually the most attractive type of offer to sellers. In fact many agents even write a note on the contract when a buyer has no home to sell (even though its already disclosed in the contract).
Buyer 2 – currently owns a house but does not need to sell it in order to buy yours. This person is usually treated the same as if they had no house to sell at all. They may disclose that they own a house but do not need to sell it in order to buy your house.
Buyer 3 – needs to sell their house before they buy your house but they have NOT listed their house for sale yet. This is the least attractive to sellers. The seller’s know how much work and time goes into listing your house for sale because they are currently going through it. They know its most likely not going to get listed and sold immediately. So if they accept your offer they have to wait for you to prepare your house, list your house, show your house and negotiate a contract. They don’t know how long it will take.
Buyer 4 – has their house listed for sale with a real estate agent but does not have a buyer for their house yet. This scenario still makes sellers nervous because there is no way of telling when they will get an offer and accept it.
Buyer 5 – is selling their house and has it listed for sale with a real estate agent AND they are under contract, meaning they have a contract with a buyer to purchase their home. This is usually still an attractive deal to a seller. If the person can show they are under contract and far enough along in the process then the seller may be inclined to accept this offer. The further along they are in the process of selling their house, the more attractive the offer will be.
Which One Would You Choose If You Had Offers From These Buyers?
Most people would prefer Buyer 1 however buyer 2 or 5 would also be acceptable. Buyer 4 would probably make the seller nervous and buyer 3 would probably not even be considered.
Note: When a seller accepts an offer from a buyer who has a house to sell they may have their attorney write into the contract that they can still accept offers from other buyers.
So Which Buyer Are You?
If you own a house and need to sell before you buy a new house then you need to look at which stage you’re at. It’s a great idea to start keeping an eye on the houses in the area you want to move to. You just don’t want to fall in love with a house and not be able to buy it because you haven’t started the process of selling yours.
Most people rationalize that if they find a house they love then they will list their house. Look at the buyer types above. The odds of a seller accepting your offer when you haven’t listed your house yet are slim. You’ll be much better off if you make the decision to sell first and then look for a house when yours is listed.