If you already own a home and are looking to sell and buy your next home, you'll have to decide whether you're going to find your next house first, or sell the one you have first.

Not surprisingly, this can be a very difficult and stressful decision.  

Most people start shopping for their next home first.  I can understand this.  People are very hesitant to sell their home until they know that they've found a suitable replacement.  Nobody wants to be homeless.  But as I hope to show you, you'll pay a HUGE cost for the security of this decision.  HUGE.

Let's consider the two scenarios:

Scenario #1 - Buy First, Then Sell

Having decided what you want in your next home, you go out and start shopping.  Let's assume, for our examples, that you own a modest house in a good neighbourhood that has a market value somewhere close to $250,000.  Your next home is an upgrade, somewhat larger with more to offer, that will likely be around $300,000.  This is not an uncommon scenario.  

When you find a suitable next house, it is indeed worth something close to $300,000.  What's next?  Well, next is to write an offer on it. However, remember that your ability to buy the next home is dependant on your ability to sell the one you have.  For this reason, you'll have to write your offer conditional on the sale of your house (which is not even listed yet, mind you). 

Now consider your offer from the sellers point of view.  Here they have an offer to purchase that is shaky at best.  It's conditional on your ability to sell you house.  They have no control over whether you'll be realistic with your pricing when you list your home. They have no way to predict how long it will take you to sell your home, or whether you'll be able to do it at all!  This is not a very appealing offer from a sellers point of view. 

So how can you make your offer more appealing, assuming you need to keep the condition of the sale of your property?  Well, the short answer is offer more money. That's the most likely way you'll be able to entice someone to 'take a gamble' on your offer. How much more?  What do you think? $10K more? $15K?  Hard to say.  Let's be conservative and assume that $10K more would be sufficient to get them to agree to your terms. 

However, we're also assuming that without that condition you'd have offered full price, which may not be the case. But let's not even consider that.  For our example, we'll assume that it's only $10K more.

But we're not done yet.  If they accept your offer, they will almost certainly insist on a 24-hour Clause.  This means that they can continue to show the home and, should they find another interested buyer with an offer they'd prefer, they can invoke the clause and require you to release the condition or lose the deal.  Now THAT'S pressure!  You now have to race to get your home on the market and sell it as fast as possible, because at any moment you know you could get the call that kills the deal. 

So what do you do if you have a house that you need to sell quickly?  How can you make it more appealing to buyers?  Simple truth: Lower the price. By how much?  Again, hard to say.  Again, maybe $10K?  $15K?  Once again, we'll also be conservative and assume that a $10K 'discount' on your home will get it sold quickly. 

So now, you've paid $10K more for the home you want, and received $10K less for the home you have - and for what?  What did that lost $20K in negotiating power buy you?  It bought you the sense of security that you would not be stuck without a home. 

Let's consider the other scenario:

Scenario #2 - Sell First, Then Buy

Having decided it's time to move on, you list your home first, and ask for a reasonably lengthy possession date (maybe 3-4 months off?).  An offer comes in and, in order to make the offer as strong as possible, the purchasers have decided to agree to the possession date that you've asked for. You decide to accept this offer.  

Ok, take a deep breath.  You now know a few things: You know:
1) When you need to be out of your current house
2) How much equity you'll be pulling out of your current house
3) That you can write a clean offer, not conditional on the sale of your home, thus strengthening your offer

So now you get down to the serious business of buying your next home.  Granted, you've got a deadline and the pressure may feel a bit greater.  However, when you do find that home you know your offer can be strong and you have increased negotiating power.  Remember, in our example, you've also got $20K more in your jeans!

And what if you don't find a house quick enough? What if, when you do find a house, the possession days don't work out and you'll be "homeless" for a month?  What then? 

Well, if you consider that you've got that extra $20K to play with, you can set you and your family up in a really nice hotel suite for a month (if you really had to), pay for professional movers TWICE, and still have the lions share of that $20K remaining.  That's probably not such a terrible "works case scenario, is it now?

It's hard for most people to think this way, but it can make a really, really big difference in the end.