Real Estate Round-Up: To buy or to sell – which comes first?

If a homeowner is contemplating selling their home, is it better to find a replacement home and then list and sell their home, or sell their home first and then hope to find a replacement property?

It is a question Realtors often hear. In a perfect world, where inventory was plentiful, and sales occurred quickly, it would not have a serious impact on the outcome, no matter which way a homeowner chose to go.

But in today's market, where inventory is lean and selling could take some time, there is only one sound decision. A homeowner must sell and then find a replacement property.

I can hear sellers now, "but I don't want to or I can't imagine being homeless." I completely agree. I would never want any of my clients to be without a roof over their heads, unless of course, it was their choice.

Twenty or so years ago, my office represented sellers who wanted to purchase a new construction home. They found the home they wanted and were provided with an approximate date for completion.

The sellers could not afford to own two homes and, even if they could, they didn't want to own two homes in the same county, so we listed their home for sale, even though the new construction was not due for completion for six months.

As it ended up, they got an incredible offer on their home. Even though their new construction was not complete, they opted to take the offer and move into a friend's RV for a few months. They chose to be homeless. We did not choose that for them.

Last year, clients decided they wanted to take a break from the hectic pace of life they were leading, so they sold their home and chose to live in an RV for a few months, until they decided where they were going to land for the next chapter of their lives. Once again, they chose to be homeless, we did not choose that for them.

So, what are the advantages of selling first and risking "being homeless?" If a seller can refrain from finding their dream home first, they are in a mindset that allows them to negotiate with a clear head.

Sellers should want to structure the best terms they can simply. As they strive to find a buyer who will pay the highest price, with the best financing and who has flexibility with the close of escrow date, the seller can incorporate an addendum to the purchase agreement that gives them a specific period of time to find a replacement property.

This addendum gives the seller time to find a replacement property and extends the time frame of the existing purchase agreement for inspections, appraisal, loan approval and close of escrow. It is a beautiful thing.

When sellers decide to do the process in reverse and find a home they want to purchase first, they innocently put themselves in a losing position. A contingent offer, that is only valid once their home goes into escrow, is weaker than a 100% financed offer.

Negotiating a lower price is nearly impossible. Negotiating any terms pertaining to time frames is also difficult. The seller of the home they want to purchase wants a buyer who is ready to go and if a homeowner must buy on contingent, they're not.

The sellers don't want to tie their home up with a buyer who may not be able to sell their home. Under this kind of pressure, the homeowner might also be inclined to accept a lower purchase price for their home, which if they weren't trying to secure a new dream home that they now desperately want, they would never consider doing.

The homeowner loses their power to negotiate on both sides of the transaction, all over the presumed fear of becoming homeless. In 23 years in real estate, my office has never had a seller become homeless, except for the two cases I shared above. There is always a safety net if the Realtor understands how to negotiate for their clients.

Don't get me wrong, there is nothing wrong with looking for a new home, just don't get carried away and purchase one. And if looking for a new home is giving a seller the itch to do something that is not in their best interest, they should stop looking.

As a Realtor, they are always looking out for their clients, whether they buy locally or in another state. Realtors can be the thread that holds a long distance transaction together, because no matter where a buyer is purchasing, all experienced, successful Realtors understand that the value they offer is not in the finding of the new home, but in the verbal skills for negotiation, to help clients achieve their goals.

It sometimes looks like a puzzle with pieces that will never fit together. Relax, and the homeowner should let the Realtor help them "win" on both transactions.

Kim Murphy can be reached at [email protected] or (760) 415-9292 or at 130 N. Main Ave., in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.