The decision of whether to buy or sell a home first is an age-old dilemma that every purchaser already owning a home faces. Making the wrong decision can be disastrous at worst and complicated at best. There are a variety of factors that must be carefully considered so the right decision ultimately will be made. This column considers this issue and provides guidelines to help purchasers make the choice that best suits their circumstances.

If you currently own your house, townhouse or condominium and are considering the sale of that property and the purchase of a new home, you first need to consider whether you will sell your existing property before buying your new one or vice versa. This is a strategic move and a good place to start in your decision making process is with a real estate professional. A good real estate agent is able to assess market conditions, including the supply of and demand for real estate in the areas where you are looking to buy and sell.

Let’s assume that you are planning on buying a resale home. In this case, it is fairly safe to assume that your home will be ready for occupancy on the closing date. (This is not always the case with a new home and different considerations apply.) However, one major consideration for resale home purchasers is the existing market for homes. If a seller’s market exists (i.e., many buyers with few properties), many buyers are competing for a scarce number of properties. As a result, the prices of homes will be inflated. In this market, the bottom line is that you will likely pay more than what you had expected. In this type of market, you would be wise to buy first and sell second. If you were to do the opposite (i.e., sell first and buy second), you may be pressured into buying a home that does not suit your needs or paying too much. With a closing date for the sale of your old home quickly approaching, this is an unenviable position to be in.

If a buyer’s market (i.e., many homes for sale and few buyers) exists, you may want to sell first. In so doing, you will have the comfort of knowing that your home has sold and that you will have an ample supply of housing from which to choose. Moreover, you will probably be able to buy your home at a reduced price. This is because in a buyer’s market, sellers are anxious to sell their home as so few buyers exist. If you buy first in a buyer’s market, you may get a good price for your new home, but you will be forced to sell your home for whatever the market dictates.

There are many other factors to consider when deciding whether to buy or sell first. Keep in mind that market conditions are apt to change, and that they may do so quickly. Interest rates also may fluctuate. Interestingly, the location of your home may dictate whether you are in a buyer’s or seller’s market. Ignoring market conditions often forces buyers and sellers into a corner. Many otherwise prudent consumers have been “burned” by ignoring these simple rules.