Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Downsizing: Sell Old House First or Second?
Old 11-16-2013, 10:48 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Downsizing: Sell Old House First or Second?

We want to downsize, and I could use some of your collective wisdom on how to go about it. We are currently in a bubble area and would like to sell before things burst. I don't see the current appreciation rates as sustainable.

We are not sure if it is better to buy the next house first, or sell the one we have first, move to temporary housing and then look for something to buy. We have a dog and work from home with various computer set ups, so moving twice and living in cramped temporary quarters without any dedicated office space isn't ideal.

On the other hand, home prices are very expensive here, so it is a bit scary to have what to us is a lot of money tied up in two houses. Part of the reason for selling is to lock in our gains and reduce our real estate exposure. Houses have gone up or down in price by over $25K in just one month in the area where we are now. The house we buy next will cost probably half as much as the one we own currently, so if the bubble busts our downside will be more limited.

I think it is safer to sell the one we have now first, the higher priced one, since that is more subject to wilder price fluctuations. That way we aren't funding two households for the overlap period. The downside to that is we may not find a house we love in the next few months after we sell ours. If we buy first we could take our time to buy the perfect house and then sell ours later.

I am leaning towards selling first because of the bubble prices. If we sell first and the bubble bursts we come out ahead buying the second house. If we sell first and price jump more we come out behind, but I think interest rates are more likely headed up than down, which would favor selling first.

Any advice is appreciated.
__________________

__________________
daylatedollarshort is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-16-2013, 10:55 PM   #2
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,860
Quote:
Originally Posted by daylatedollarshort View Post
I think it is safer to sell the one we have now first
That's exactly what I would do. It's safer, financially speaking, in case there is some delay in selling your house. An even greater concern, is that to buy the second house first I would have to sell some of my portfolio; I am thinking the capital gains after doing that could be a blow.

I would probably minimize the trauma of moving twice, by putting 90% of my stuff in storage. I'd rent a small apartment and just put the bare essentials in there. There wouldn't be that much packing and unpacking when moving in and out of the apartment, and most of my stuff would just be unpacked once, when moving into the new home.

It's tough with a dog (I don't have one). Maybe you could board the dog and go over there a lot and visit with the dog.
__________________

__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 11-16-2013, 11:09 PM   #3
Dryer sheet wannabe
 
Join Date: Oct 2013
Location: Seattle
Posts: 20
We bought our retirement condo in 2011, while still living in our (paid off) original home. We figured it was a good time to buy, and we used it as a weekend place for the past two years.

I am retiring next month, but DS has two more years before college, so we're not moving just yet. Instead we are putting the condo up for rent to help replace some of my income. We think the home we're in now will continue to appreciate until we are ready to sell. Part of that timing will hinge on where DS ends up for college.

Anyway, it was nice being able to take our time shopping for the retirement place while comfortably living in our original home. If you bought a new place but couldn't get the old one sold, could you rent out one or the other?
__________________
NW-Reader is offline   Reply With Quote
Old 11-16-2013, 11:28 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by NW-Reader View Post
If you bought a new place but couldn't get the old one sold, could you rent out one or the other?
Yes, that is a possibility. In fact, we don't have enough after tax money to buy the second house outright unless we sell the first house, so the pre-approval letter for the retirement house mortgage had it listed to buy as a rental.
__________________
daylatedollarshort is offline   Reply With Quote
Old 11-17-2013, 12:21 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,018
I bought first, sold second, and it worked out for me, because I was moving from a sellers' to a buyers' market. I also rented out the second place for a year before I moved into it.

However, I have neighbors in my new place who were moving within the area. They bought first at the peak of the market, but then it dropped dramatically and they found they could not sell their home. Eventually they had to reduce the price by ~$100K to sell it. At the time they finally moved into their new home, people were buying similar homes for $100K less. So they essentially lost $200K by selling first. Avoiding such a loss would be worth a temporary move to a rental, I think!

So my advice would be that if you think the market in your area could be at its peak now, sell first.
__________________
Meadbh is offline   Reply With Quote
Old 11-17-2013, 12:35 AM   #6
Dryer sheet wannabe
 
Join Date: Oct 2013
Location: Seattle
Posts: 20
I'm wondering about the bubble thing. You would know your own area, but aren't there still foreclosures working their way through the system? And if you are financing home 2, wouldn't it make sense to grab the current low interest rates? When rates start to go up again, I think it will cause a buying frenzy, and that would be the time to sell home 1. Just some thoughts...
__________________
NW-Reader is offline   Reply With Quote
Old 11-17-2013, 12:49 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by Meadbh View Post
I bought first, sold second, and it worked out for me, because I was moving from a sellers' to a buyers' market. I also rented out the second place for a year before I moved into it.

However, I have neighbors in my new place who were moving within the area. They bought first at the peak of the market, but then it dropped dramatically and they found they could not sell their home. Eventually they had to reduce the price by ~$100K to sell it. At the time they finally moved into their new home, people were buying similar homes for $100K less. So they essentially lost $200K by selling first. Avoiding such a loss would be worth a temporary move to a rental, I think!

So my advice would be that if you think the market in your area could be at its peak now, sell first.
Meadbh, that is exactly the kind of what to avoid experience I was looking for. I'm sorry to hear about your neighbors monetary loss, but maybe it will help us to not make the same mistake they did.
__________________
daylatedollarshort is offline   Reply With Quote
Old 11-17-2013, 12:53 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,402
For what it's worth, I'd like to mention that I have read announcements from quite a few banks recently regarding layoffs of several thousand employees in their mortgage processing divisions. The common reason given has been that they were expecting lower RE activities in the days ahead. Of course, that may not have any bearing on a local RE market.
__________________
NW-Bound is offline   Reply With Quote
Old 11-17-2013, 01:07 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by NW-Reader View Post
I'm wondering about the bubble thing. You would know your own area, but aren't there still foreclosures working their way through the system? And if you are financing home 2, wouldn't it make sense to grab the current low interest rates? When rates start to go up again, I think it will cause a buying frenzy, and that would be the time to sell home 1. Just some thoughts...
Getting a low interest rate would be nice on the new house, but when interest rates go up it could reduce the number of people who can afford to qualify for mortgages, especially for the current house, which will be the more expensive of the two.
__________________
daylatedollarshort is offline   Reply With Quote
Old 11-17-2013, 01:28 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by NW-Bound View Post
For what it's worth, I'd like to mention that I have read announcements from quite a few banks recently regarding layoffs of several thousand employees in their mortgage processing divisions. The common reason given has been that they were expecting lower RE activities in the days ahead. Of course, that may not have any bearing on a local RE market.
It may not have a bearing but it is certainly a sign things might be slowing down, or even about to burst. I would like to sell the current house before prices drop. Shiller has us in a "possible" bubble market.
__________________
daylatedollarshort is offline   Reply With Quote
Old 11-17-2013, 10:17 AM   #11
Full time employment: Posting here.
 
Join Date: Mar 2008
Posts: 637
If I were in your shoes, I would move and buy first ONLY if I could comfortable afford it. If your house does not sell for several years- can you absorb that? If so, go for it! If not, I would sell first and buy later.
__________________
bizlady is offline   Reply With Quote
Old 11-17-2013, 12:08 PM   #12
Thinks s/he gets paid by the post
 
Join Date: Apr 2010
Posts: 1,685
We sold first...and then put everything into a 16X8X8 PODS container for storage.

Best thing we ever did. Had a great forced clear out of 30 plus years of stuff. It forced us to be prepared for a downsize. And we are still discarding unwanted items.
__________________
brett is offline   Reply With Quote
Old 11-17-2013, 12:26 PM   #13
Full time employment: Posting here.
Accidental Retiree's Avatar
 
Join Date: Feb 2012
Posts: 975
We ask ourselves the same question; we are in the SF Bay Area and have seen some of the same market conditions you are seeing.

We also have dogs, and we know it would be tough to find a rental property to hold us over until we find the right spot -- if we ever find it.

A realtor we know up in Oregon listed her house, and she, her DH, her 40# dog, and her cat lived in an Oregon wine country RV park, in a 5th wheel, for 4 months. They never moved the 5th wheel; they just lived in it and then sold it when they bought their new home.

I thought that was a creative approach!
__________________
Chief Retirement Strategist
The AR Group
Accidental Retiree is offline   Reply With Quote
Old 11-17-2013, 12:46 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,402
A timely article on this subject: Bid Wars Wane in U.S. Housing Markets on Supply Rise - Bloomberg.

Excerpt:
Asking prices in September were lowered on about 25 percent of listings, the biggest share in two years, while last month they were cut on 23.8 percent, according to Seattle-based brokerage Redfin, which tracks 22 cities across the country. The inventory of unsold U.S. homes climbed in September from a year earlier for the first time since 2011, while contracts to buy previously owned residences plunged the most in three years, data from the National Association of Realtors show.
__________________
NW-Bound is offline   Reply With Quote
Old 11-17-2013, 01:23 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by Accidental Retiree View Post
We ask ourselves the same question; we are in the SF Bay Area and have seen some of the same market conditions you are seeing.

We also have dogs, and we know it would be tough to find a rental property to hold us over until we find the right spot -- if we ever find it.

A realtor we know up in Oregon listed her house, and she, her DH, her 40# dog, and her cat lived in an Oregon wine country RV park, in a 5th wheel, for 4 months. They never moved the 5th wheel; they just lived in it and then sold it when they bought their new home.

I thought that was a creative approach!
That is creative. It is certainly something to consider.
__________________
daylatedollarshort is offline   Reply With Quote
Old 11-17-2013, 01:37 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by bizlady View Post
If I were in your shoes, I would move and buy first ONLY if I could comfortable afford it. If your house does not sell for several years- can you absorb that? If so, go for it! If not, I would sell first and buy later.
Houses sell pretty quick here - but the month to month price swings are kind of scary.

Technically we can afford to buy first - we have been pre-approved for the loan on the downsized house.

But I'm not comfortable about it. I guess that is really the answer. Selling first has much less financial risk, unless prices go up dramatically from when we sell to when we buy, which seems like an unlikely scenario at this point in time. I think if anything dramatic happened, a 2008 type meltdown is more of a concern.
__________________
daylatedollarshort is offline   Reply With Quote
Old 11-17-2013, 01:43 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,326
Quote:
Originally Posted by NW-Bound View Post
A timely article on this subject: Bid Wars Wane in U.S. Housing Markets on Supply Rise - Bloomberg.

Excerpt:
Asking prices in September were lowered on about 25 percent of listings, the biggest share in two years, while last month they were cut on 23.8 percent, according to Seattle-based brokerage Redfin, which tracks 22 cities across the country. The inventory of unsold U.S. homes climbed in September from a year earlier for the first time since 2011, while contracts to buy previously owned residences plunged the most in three years, data from the National Association of Realtors show.
We went to an open house yesterday and someone asked the realtor "when will you be looking at offers?" and I just thought oh please those days are over, at least for now. There are easily 200 houses within 5 miles on the market in this price range and it is the holiday season.

But I think it takes awhile for realtors, buyers and sellers to have their thinking catch up with reality.
__________________
daylatedollarshort is offline   Reply With Quote
Old 11-17-2013, 02:15 PM   #18
Moderator
MBAustin's Avatar
 
Join Date: Jul 2010
Posts: 4,152
There are certainly tradeoffs with either approach. We bought and then sold. We had significant equity in the "old" house (which is actually a newer home than the one we bought and remodeled) so we knew we would still come out ahead even if we needed to significantly reduce the asking price and we budgeted for a year of making two mortgage payments (including several months of remodeling "new" house before moving in). Another major factor was DH's disability, which made moving into an apartment temporarily not very feasible, and also severely limited our choice of houses to purchase (very specific requirements on the garage size and configuration to accommodate the ramp on his minivan, for example). Finally, since we were staying in the same general area, our shopping to buy gave us a very good understanding of how much we expected to get on the sale.

In our case, it worked out better than we had any right to expect. It took us a year to find and close on "new" house, 5 months to remodel and move, and a month to fix up "old" house to sell. We had a full price contract within a week for significantly more than we had budgeted. Obviously, YMMV. But we were prepared for much different circumstances, that was definitely part of our success.
__________________
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute." William Feather
----------------------------------
ER'd Oct. 2010 at 53. Life is good.
MBAustin is offline   Reply With Quote
Old 11-17-2013, 04:08 PM   #19
Thinks s/he gets paid by the post
DFW_M5's Avatar
 
Join Date: Sep 2003
Posts: 4,982
We found our ideal house that was still in the construction stage and then placed our house on the market. We were fortunate in capturing the market just right, got asking price and the house sold in a couple of days. We negotiated the sale so that we leased back our old house from the buyer for ~ 3 weeks until the new one was completed, so we only had to move once. We originally had seen another new development that we liked, but it would have taken 5-6 months to move there as the house needed to be started from scratch and I wasn't too keen on placing everything in storage and moving to an apartment in the interim.
__________________
Doing things today that others won't, to do things tomorrow that others can't. Of course I'm referring to workouts, not robbing banks.
DFW_M5 is offline   Reply With Quote
Old 11-17-2013, 06:58 PM   #20
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 1,823
OP,

Based on everything you have written so far in this thread, it seems clear to me that you will be more comfortable selling your existing home first. Once you know for sure it's sold, and you know how much you got for it, I think you will find the process of finding your next home to be very relaxing and enjoyable.

I lived in temporary housing for six months while doing the exact same thing, and while it was inconvenient, it really wasn't that bad. And the peace of mind it gave me was priceless.
__________________

__________________
Ready is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 07:42 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.