Many sellers ask my opinion on whether they should sell their current house first, or buy their next house before selling their current home. Selling and buying a home is the largest transaction most people will ever make. Doing it right is crucial - not only to your health, but your financial health & personal satisfaction.
The answer to this really depends on your financial situation, and your level of risk tolerance. There are risks to both choices, some laid out here:
Buy before selling
• You could get stuck carrying two homes if your original home doesn’t sell in time.
• You may not qualify to carry two homes, and get yourself into legal & financial trouble
• You may net far less than you expected on the sale, thus over your budget on the purchase.
• You may be extremely stressed during the time you’ve purchased, and not yet sold your current home, even if for no legitimate reason.
Selling before buying
• May not find anything you like, and be forced to buy something you don’t.
• May lose that house that’s currently on the market you’re in love with.
• May lose chance of porting your mortgage if you take too long to buy your next home.
• Take too long to buy your next home, you won’t enjoy any market value increases that may have occurred in the market.
For some, the risk of buying before selling is well worth it. Finding the right home is extremely important, and you can take your sweet time looking for it, as you still have your current home. For others, knowing exactly where they are at financially means more, and prefer to sell first. They can also take more time selling and net top dollar for their home, as there’s no rush to sell.
If you want to simplify things a little more, you can simply take a look at the market in your area, or have a Realtor do it for you: If it's a buyer's market, sell first. If it's a seller's market, buy first. How do you know for sure? That's a whole other topic, but we all have access to the numbers to help us determine what's happening.
Assess your finances, risk tolerance, and decide what’s important to you before making your decision. Consult your realtor about solutions concerning financing, information on what your house is worth, and what you can get for your money when buying. If you do your homework, it’s an easy decision.
For further reading, here's an article from The Star on the topic.