Real Estate: Sell first; buy later. Or Buy First Sell later

[Livin Large in MT]

Hi!
I have been on this website for years and years. Finally retired a couple years ago and thoroughly enjoying it with spouse.
While I am Livin Large in Montana, it is time, at our age, to sell and leave. We have horses so that complicates things a bit.
We will be able to put our house on the market this spring very easily. However we are having trouble finding exactly what we want for our next move...which will be to Colorado. Either around Denver where the kids are or west of there. We can handle the (much higher) prices for much less than what we have here. But the amenities are a bit harder to find and we find ourselves still on the hunt for the exact place we want.
The real estate market here is about as good as it has ever been. So our dilemma is this: should we sell without having a place to go...or wait til the right place comes along to buy and then sell our house.
We can handle the logistics of all that as there are plenty of places to board our ponies til we find something else. So without taking any of that into account, what do you fine folk think?
There is a TON of wisdom on this site and I would love to hear it.
THANKS!!!

 

[REWahoo]

One painful experience taught me to always sell before you buy.

 

[MBAustin]

I think in your situation I would sell and either rent in the Denver area or leaseback from the purchaser until you find what you want. Full disclosure - we did not do that when buying our retirement home (which needed 6 months of renovations before we could move in), but it was in the same neighborhood which was in high demand and we budgeted to keep paying the mortgage an additional year if needed (it wasn't as it sold within days of putting it on the market). But your situation is very different.

 

[SumDay]

One painful experience taught me to always sell before you buy.

Ditto, and good luck. We did this (with no ponies) in 2015, and lived to tell about it.. I still pinch myself because I can't believe we did it. It was far more work than either of us anticipated.

 

[Livin Large in MT]

Can you tell me about your painful experience? Or would you rather reply privately?

 

[pb4uski]

If you sell now while the market is good and have a big pile of cash, that will give you a lot of flexibility and choices in buying.

 

[Jerry1]

I was able to buy before I sold. We bought a house near my daughter and grandkids which was only about 45 minutes from my existing home. We bought the new home first, renovated it, moved in and then sold the old house. It was a lot easier on the nerves that way. Given that the old house was paid off and had been liven in for over 25 years, I wasn’t too worried about maxing out my sale price, however, the market did hold up through the entire process and it worked out well.

In the case here, I feel like I’d sell and then buy. Given the logistics of moving out of state and wanting the best return on the current house, it just seems like selling Luke before buying new would be the way to go. Given the closeness of my move, it was easy to handle two houses for awhile. I don’t see that as being true for the case here.

 

[REWahoo]

Can you tell me about your painful experience? Or would you rather reply privately?

Company transfer in the early 80's. RE market was in the toilet and interest rates were double digit. Found a great home in the new location and purchased (bridge loan) before selling. Took 7 months to unload it and had to carry part of the note for the buyer to do so. Having two mortgages wasn't conducive to a good night's sleep.

 

[W2R]

I don't know what you should do. But here is what I did when I moved, back in 2015.

When I moved, I didn't want to miss out on getting my Dream Home in what was then a very hot real estate market. I had been looking for the right house for me, in a leisurely way for about four years, but like you I had a lot of requirements and amenities that I insisted on having. To begin with, it had to be in a particular neighborhood (near F's house) and also it had to have a garage, which are rare in this neighborhood. And then I had many more requirements too.

Anyway one night after dark I saw a realtor putting up a for sale sign on my present home, in the perfect location right next door to F, and the house had a garage. I just knew this was meant for me, and I jumped on it! I didn't want to wait and let other buyers see it and submit offers. I scheduled the first showing the next morning, made a verbal offer at the showing, and had a full price cash offer formally submitted within an hour or so after that, before anyone else even had a chance to see it and before it ever hit the MLS. Closing was scheduled ASAP. In that hot market, the only way to get a good house was to jump on it like that.

Soon after closing I moved, and then I had to sell my old house, which was paid off. It was stressful to own two homes in cash, and expensive to be paying bills on two homes at the same time. Luckily the same hot market that scared me when buying, was my ally when selling. It was under contract four days after listing, at the asking price although closing was scheduled for two months after that.

I must admit that I was terribly worried that I had somehow wrecked my retirement by borrowing the money for my Dream Home from my retirement funds, until I could sell the old house. What if it didn't sell for some reason? What if the buyer backed out for some reason? In my case I was already retired and finding a good paying job at my age was not likely. This type of situation is very stressful and as REWahoo pointed out, it doesn't always turn out well.

I sighed in great relief when I actually got the money for my old house, to replenish my retirement nest egg (from where I had taken the cash to buy my present home). Realistically, I only owned both houses for two months, and I can't even begin to imagine the stress if I had been in that situation even three months, much less six months or more.

Once I got that money from selling the old house I felt like I had pulled off the scam of the century. Everyone I knew was asking me how I managed to get my Dream Home at such a good price in such an impossible real estate market. Basically I was lucky, because it was a huge gamble.

 

[Jerry1]

I think that’s one of the main points. Can the OP carry both houses financially (cash) or would mortgages be involved. I owned my old house and was able to pay cash for my new one. That made the situation a lot easier to manage.

 

[Livin Large in MT]

Man I hear you...what you wrote is EXACTLY what I think about. My bank is Happy to loan me the $$ so I can buy before I sell because of our retirement nest egg...but the thought of having to sell the old house while making payments on two houses keeps me up at night. Selling first seems attractive although...what if it takes another couple of years to find the right place down there? I can't be a homeless gypsy forever, can I? Or can I?

 

[CaptTom]

We're facing a similar dilemma. It would be most convenient to find a new place before selling the old. Moving, for one thing, would be simplified. No storage units.

Still, we're leaning the other way. Sell now while the prices are good. Not that I'm one to time the markets, but there's a real possibility real estate will take a hit at some point in the next year or two.

But the real reason is we can take our time finding the right place, at the right price. The savings in insurance, property taxes, utilities, etc. will more than cover storage and help out with travel expenses to some places we'd like to consider.

 

[REWahoo]

...what if it takes another couple of years to find the right place down there? I can't be a homeless gypsy forever, can I? Or can I?

You have to be prepared to rent for as long as it takes to find what you want.

 

[oldphd]

FWIW, my story...

We moved to the Front Range just under an hour north of Denver last year from over 1,000 miles away. Our prior house was lived in a loooong time and paid off, and we planned to do some work to put on the market. We were also paying cash for the new place (I'd been preparing for this move for a few years from a cash standpoint, selling investments to the 0% LTCG level).

We ended up paying more than we'd planned and took some out of Roth to tide us over. Not my first choice, but I figured I'm investing in a house now which also has some 0% tax on gains. Had 2 houses for just under 6 months. But plenty of options so even if things had gone south we could weather things from a financial standpoint. As it is, we have the cash from the old house in short CDs to live off for the next few years as we do Roth conversions.

As for looking, we had a general area we wanted (about 10 miles by 30?!?). While this is a relatively hot area, we were also well above the median price and things aren't moving as quickly in that range, and since we were paying in cash we were a desirable buyer. We'd been looking casually at this area for a few years, and finally decided that a less than perfect place here was way better than where we were at. If we were serious about making this geographic move, sooner we do it the better. And looking from long distance is difficult. One place came on the market about 2 weeks before our house hunting trip that looked great and was gone in a day. When we got here we went and looked, turns out it was a short distance from a pig feedlot... Phew! We spent 3 days looking here before settling on a place, had an accepted offer within another day. Closed in a month. Everything went smooth. If I had waited a year, or two, and found something better or cheaper or ?!?!?, I would also have a year or two less to live here. We're at a point where we have enough health items looming that I don't want to be someone who waited around and then kicked the bucket with tons of money to enrich my kids live because I was the proverbial janitor living in a shack with no heat and $10M in the bank...

It was a lot of work getting moved, but much of that was cleaning out too much stuff from too many years, which would have happened under any circumstances. This despite a couple of years of knocking out a little at a time. We had more to do than we realized as far as pitching and donating, so we were happy to have months to work on that, get some work done on the old house, and get things moved at our leisure.

While it's not clear that I gained money by doing the work on the old place, I did get multiple offers over asking the first day. All were from buyers with little to put down, so the work we had done was essential for them to be potential buyers. In hindsight, I wonder if I should have tried to sell as is, though no idea what I might have gotten. Only about a month of time would've been saved, and the money I spent fixing up represented 1% of our net worth.

Very happy with where we ended up. There are pros and cons to everything, and I could pick a location I would have preferred perhaps 5-8 miles away, but the homes there with the amenities we've got here were out of our price range.

There is no perfect place (well, except for W2R! ), IMHO. Weather, house, etc. We made such a big step up in the house, location, etc., that we aren't second guessing anything. As the common cartoon that floats around here says: Time > Money.

Whatever you decide, good luck with your move!

 

[pacergal]

My choice would be to sell, then rent for awhile in the new area to find exactly what I wanted. Would have to move twice, but thats more opportunity to do more purging!

 

[travelover]

My choice would be to sell, then rent for awhile in the new area to find exactly what I wanted. Would have to move twice, but that's more opportunity to do more purging!

This is what we did, moving from the Midwest to the Pacific Northwest. Renting worked out well as it gave us plenty of time to get to know the new area and the real estate market. I've purchased a house before selling the old one in the past and I'd not repeat that unless the situation demanded it.

 

[Dtail]

Isn't there a time frame to buy a house after selling one in order to defer the tax gain, or is that an old rule not in effect anymore?

 

[HI Bill]

Isn't there a time frame to buy a house after selling one in order to defer the tax gain, or is that an old rule not in effect anymore?

That was eliminated a long time ago.
Now you get to exempt the first $250K of gain, per person (up to $500K for married). https://www.irs.gov/taxtopics/tc701

1031 exchanges are the only way that still works, to my knowledge.

 

[Dtail]

That was eliminated a long time ago.
Now you get to exempt the first $250K of gain, per person (up to $500K for married). https://www.irs.gov/taxtopics/tc701

1031 exchanges are the only way that still works, to my knowledge.

Thanks, thought I did hear that, but too lazy to look up.

 

[Livin Large in MT]

OldPhd: You must be my twin! We are doing exactly the same thing...trying to decide how much to put into the old house and if it really makes that much of a difference. But we are doing it based on our realtor and our daughter's recommendations: our daughter is a pretty good real estate person having bought and sold and moved multiple times and made $$ (luck plays into it of course too).
Front range is tricky: you want to avoid tornado alley and the worst of bad driving conditions in the foothills area. I think we have found a couple of sweet spots. We are not 1000 miles away but it hardly matters if it takes a day to get down there. SO we've watched a couple of places go that I might have bid on had I been closer to selling here. I simply could not bear to buy and own two even though we can do pretty much exactly as you described.
Turns out a lifetime of investing and saving makes you think hard about throwing your $$ around...even when you figure you could get away with it. Dave Ramsay used to say, live like no other so you (when you retire with enough $$) can live like no other. I must admit I am having trouble with the last part as I am too used to living carefully. Also I have watched people really blow it in their last years and have no time to make it up.
Anyway, it is SOOO helpful to hear these perspectives and realize that time is just as important as money these days.

 

[brett]

We sold first. We did some travel, then came back to rent.

Renting was ideal for us. It gave us a chance to try and buy. A six month rental turned into four years. Then we bought. The real estate market was going south during that time. Our money did much, much better in the market. Renting was a nice change after owning for thirty five plus years.

There is no right answer. It really depends on the market where you are selling and the market where you are buying. Plus, in our instance, our willingness to move into a rental and take our time.

 

[Scuba]

I’d sell first and then buy so you can look with no time pressure. If you find your dream home before you’ve sold, it sounds like you have the financial flexibility to jump on it. Good luck!

 

[oldphd]

OldPhd: You must be my twin! We are doing exactly the same thing...trying to decide how much to put into the old house and if it really makes that much of a difference. But we are doing it based on our realtor and our daughter's recommendations: our daughter is a pretty good real estate person having bought and sold and moved multiple times and made $$ (luck plays into it of course too).
Front range is tricky: you want to avoid tornado alley and the worst of bad driving conditions in the foothills area. I think we have found a couple of sweet spots. We are not 1000 miles away but it hardly matters if it takes a day to get down there. SO we've watched a couple of places go that I might have bid on had I been closer to selling here. I simply could not bear to buy and own two even though we can do pretty much exactly as you described.

At the old place... we painted (7-8 years since done, but one former nursery with a rainbow!), refinished hardwood floors (30 years since done), and put in a new electric panel. Panel was 25 years old with signs of a small amount of water coming in, certainly functional but not desirable. Also used a realtor. She was on board with the work we planned, even pushed for a couple more things which we ended up doing as part of the contract (couple of new window panes that were degassed, not all that expensive). I was out of town before it hit the market and never went back, she handled it all. At best, I might have come out $10K ahead without doing the work. Probably would've taken longer since I would need the right buyer, someone who had cash and/or wanted to put in some sweat equity. No regrets. Spent about $500 on a move out cleaning, probably one of the best uses of money, highly recommended!

At the new place... Window was Longmont to Fort Collins, west of I-25 (tried to be in the weather shadow), but not too far west to have a back mountain view. Reasonable access to RMNP was our priority, since I grew up spending a lot of time there. But didn't want to live that high for weather, and be in more of a town for medical and shopping. Ended up about a half mile east of I-25. It's about an hour up, just went up earlier this week on a sunny day, nice to spend a little time and grab lunch in Estes. Got a great view, but house is bigger than needed for 2 of us. Having said that, most of our neighbors on the ridge with the view are couples like us, in or near retirement age. We can afford it, and want the amenities, so we all blew the dough!

One comment on the two places at once... aside from cleaning out years of crap, I have a hobby with large items that I moved myself and didn't want to store. Difficult to sell and replace, had my toys for years and customized them. This was a complicating factor that not everyone would have. No regrets on having two places, the amount extra we spent was modest. We also had a relatively cheap place before (new place is about 3.5x cost of old place).

Also under an hour to DIA, we have 2 trips planned for a total of 6 weeks this winter to warmer climes and grandson. Life is good!

I think you need to just be here to look at places when ready to buy. As others have said, renting to ensure you like the area is a good idea. For us, we decided that having visited the area as much as we have we could avoid that. Thought about moving a year sooner but had to many trips planned, so this year was the move year with nothing else on the calendar. To each his own. Very happy with how it has all worked out, I'd say make your plan and execute, stop dilly dallying!

 

[LivePassionately]

Sell, Sell, Sell



I invest in single and multi-fam and in my humble opinion, the market seems to be in a bubble. I am long-term investor so I'm making sure I can re-finance anything I need to know while things are good and am going to hang on since I have a long time horizon. Also, I want to caution that of course this is all anecdotal but my gut feel is to sell now.

Here are a few observations I've seen that may or may not apply to you.

1. I can't find anything decent to buy as an investor. Forget buying on MLS. I couldn't find many deals on MLS even so I don't use it. I generally find all my deals off-market and this means I'm getting a bank property or auction or a vacant fixer-upper. Generally, the spread on these were great and you get 15% returns (because they need so much work and its a lot of risk). At least in the North East now, it's so tough to get anything that makes investing sense even off-market. Even buying for cash on auction sites is tough and I'm seeing people bid at above market values sometimes due to bidding frenzy on some smaller houses.

2. I've seen people with zero experience that would never bid on houses normally bid on them. I have a friend that is a waitress and she is trying to get in. I have another friend that works at home depot that is looking to flip. They basically said that they are seeing how much the people on the fix and flip shows are making on TV and on you tube,face book and they want to try their hand at it. Now, there is nothing wrong with this normally but these folks have zero experience in flipping and it reminds of when everyone was buying houses in the last crash. Luckily, its still not easy to get a mortgage so at least they are relying on hard money loans. I'm also seeing this pattern in all the online groups and conferences that I'm going to where the number of folks interested and attending has almost doubled from a few years ago.

3. The contractors I work with are having a hard time getting paid in the last 12 months. Why is this happening when the economy is solid. The only thing I can guess is that investors are buying at prices that don't make sense and when reno budgets go over, they can't pay the contractor.

 

[jollystomper]

I vote sell first, rent for a bit to get to know the area, and buy later.

On our last move we almost bought a house the week Megacorp gave us to look around the new area. That would have been a horrible decision. We sold our old house and rented for 3 months to get to know the area more. If we had not done that we would not have found our dream home.