It's the old "chicken or the egg"
story. Every day hundreds of people struggle with the dilemma of
what to do first... Sell their home and then buy one, or buy
another home and then sell theirs.
Each method has its own risks. However, there is usually one
option that will work best. Let's take a look at a very
traditional couple, Bob and Gloria. They must decide which
option to use: Sell their existing home first; or buy a new home
first and then sell their existing home.
Bob and Gloria knew for some time that they would be selling
their home on Clearbrook. They had purchased it just after they
were married and now they were outgrowing it. They loved their
present neighborhood and wanted to move to a similar area.
They had made many improvements to their home. It was decorated
in the very best of taste. Everything was in perfect condition,
but the home was just too small now that they had two children.
They had their Realtor, John Anderson, stop by and give them a
value on their home. John looked through the home and noted all
the improvements they had made within the last five years. He
estimated the value of the home, and advised Bob and Gloria that
it would probably sell within 30-60 days.
Encouraged by this, Bob and Gloria asked John to keep an eye out
for homes in the Oak Hollow area. Specifically, three or four
bedroom homes with fireplaces. John began sending them Oak
Hollow listings from his computer, and they would visit open
houses in the area.
Occasionally Bob and Gloria would schedule a private showing
with John to see the inside of a home or two. They began to get
a real feel for what was available. Over a three- week period,
Bob and Gloria saw a number of Oak Hollow homes that they liked.
However, they didn't find the perfect home.
Perhaps if their home on Clearbrook was already sold, one of the
Oak Hollow homes would have been more appealing to them. It
would have been much easier for them to make a decision.
At John's suggestion, they visited their Lender and obtained a
"Preapproval Certificate." John explained that this was their
approval for a new home loan. This certificate would show a
seller that Bob and Gloria were qualified to obtain a loan. It
would make any offer more appealing to a seller.
Bob and Gloria now knew they could afford to move. However,
because they didn't have to move, because there was no
urgency, they decided not to put their home up for sale until
they found the perfect new home.
Bob and Gloria were worried about selling their home before
finding another. They were concerned that since their home was
so nice, it would sell quickly... perhaps too quickly.
Then they would have to make a fast, or even a rushed, decision
on a new home.
They were afraid of having to compromise if there was nothing
out there that was just right for them. So they chose to keep
looking, instead of listing their home. They visited more open
houses, and they drove by almost every new listing John sent
On weekends they drove through Oak Hollow and other similar
neighborhoods just to look, see and feel the areas. They
always came back to Oak Hollow because it was their favorite
area. They liked the schools and its proximity to freeways. It
was a reasonable distance to both of their jobs.
Each Tuesday, Thursday and Saturday they received a packet of
new listings from John that his Multiple Listing Service
computer search had turned up. One day, Gloria opened a packet
of listings from John. Inside were two brand-new Oak Hollow
listings. She drove by them, and thought they both had
Gloria discussed both listings with Bob that evening. They
decided to call John and arrange to look at the homes Monday
evening. That Monday evening their lives changed.
They found the perfect Oak Hollow home. It was gorgeous.
Everything that they had hoped for and more. Two fireplaces
instead of one, 2 ½ baths instead of 1 ½, and a master bedroom
with huge walk-in closets.
The only problem was the asking price. It seemed to be about 10%
higher than other similar homes were selling for in the area.
Even allowing for the perfect condition (the setting, the baths
and fireplaces), the most they could justify offering was about
5% less than the asking price.
Bob and Gloria had John prepare an offer that evening for 5%
under the asking price. They felt it was a very reasonable
Of course, since their home wasn't even for sale yet, they had
to make the Oak Hollow offer contingent upon ('subject to') the
sale of their home on Clearbrook. In other words, they wanted
the Oak Hollow owner to remove his home from the market until
their home on Clearbrook sold.
Bob, Gloria and John were convinced that their home on
Clearbrook would sell within 60 days. Therefore, they worded
their offer to ask the seller of Oak Hollow to hold his home off
the market for 60 days. That would give them the necessary time
to sell Clearbrook.
According to the contingency, if their home on Clearbrook did
not sell, they would not have to buy Oak Hollow. Everything
would work in their favor because they would not lose any money.
They had no risk.
The next day John presented the offer to the Oak Hollow Realtor,
Margie Lomas. He explained to her how perfect Oak Hollow was for
Bob and Gloria. He gave her a copy of Bob and Gloria's
Most importantly, John took great pains to share with Margie all
the details of Clearbrook “ how perfect it was. He told her
they would list the home "right on the money" to make sure it
John also told Margie that he was convinced Clearbrook would
sell in two or three weeks at the most. He said that even
though the offer was contingent upon the sale of Clearbrook,
there was very little risk to the Oak Hollow owner.
Margie seemed very positive about the whole offer. She promised
to meet with the Oak Hollow owners that evening. John called Bob
and Gloria to tell them that he thought things went well, and to
keep their fingers crossed.
Margie called John back the next morning with bad news. Even
though Bob, Gloria and John felt strongly that Clearbrook would
sell within 30-60 days, the owner of Oak Hollow was afraid of
removing his home from the market for any length of time. He
wanted some "shouldering of the risk" by Bob and Gloria.
The Oak Hollow owner felt that he was being asked to take all of
the risk. If Clearbrook did not sell in 60 days, Bob and Gloria
would walk away scot-free. They would loose nothing it wouldn't
cost them a penny.
However, Oak Hollow would be off the market for 60 days of prime
selling time. The Oak Hollow owner knew he had one of the nicest
homes in the area. He was sure that Oak Hollow would sell
within 60 days.
He just couldn't see any benefit to taking it off the market and
"hoping" that everything went as planned with Bob and Gloria's
home. Also, the Oak Hollow owner further observed that if he
accepted Bob and Gloria's contingent offer, he couldn't make any
He had no way of knowing for sure if Clearbrook would sell, so
for 60 days he would be "in limbo." He did not want to be in
that position. The Oak Hollow seller had a whole different
perspective of the proposal than did Bob and Gloria.
He worried about, "What will I do and where will I be if things
don't work out?" All Bob and Gloria could see was, "It's a 99%
sure thing... just give us a little time and we'll work it out."
Based on his concerns with the proposal, the Oak Hollow owner
indicated to his agent that he would consider one of the
Option # 1: He would take Oak Hollow off the market and
hold it for 60 days for a non-refundable deposit of $3,000. The
$3,000 would apply to the purchase price; but if the sale did
not close within 60 days, Bob and Gloria would forfeit their
$3,000 to the seller. This type of arrangement would shift some
of the risk to Bob and Gloria. The amount of $3,000 seemed to
be a reasonable figure for the seller. This would cover his
loss if he held his house off the market for 60 days and then
had to start all over.
Option #2: He would agree to sell the home to Bob and
Gloria at the price they offered. However, he would reserve the
right to keep his house "on the market" and sell it to any other
buyer who came along in the meantime. If Bob and Gloria could
sell their home before another buyer came along, they could get
Option #3: He would agree to hold the home "off the
market" for Bob and Gloria for 30 days, but he wanted the full
asking price. This would be his compensation for holding the
home off the market. Under this option, Bob and Gloria would be
under no risk if their home did not sell. However, they would
have to pay a higher price to get the home they wanted.
Bob and Gloria talked to John about the three options. None of
the options were what they had hoped for. John explained that
the seller of Oak Hollow wanted to know with a strong degree of
certainty that if he took his home off the market it would be
The first option would allow him to receive reimbursement in
case Bob and Gloria's home did not sell promptly.
With the second option, he could keep the house listed; and he
wouldn't lose any time if Bob and Gloria couldn't purchase it.
The third option would allow the owner of Oak Hollow to receive
the full asking price. In exchange he would keep the home off
the market for 30 days.
The owner knew Oak Hollow was a beautiful home in a great
location. He knew there would be other buyers that would love
his home. In other words, he knew Oak Hollow would sell quickly,
at a good price. He didn't need to get involved with hoping
someone else's home would sell.
"But I don't know if I want to risk $3,000 if my house doesn't
sell," said Bob, referring to Option #1. "What if our home
doesn't sell within 60 days? Is it worth risking $3,000 to
get Oak Hollow?" Bob scratched his head. "And I know I
don't want Option #3! As nice as Oak Hollow is, it's not worth
the full asking price!"
"But if we don't take Options one or three," observed Gloria,
"we're stuck with Option #2 “ and Oak Hollow will probably sell
before we can get our home sold." "Or, we have to pay a high
price or risk a substantial deposit to hold it," replied Bob.
After considering every side of the issue, Bob and Gloria
decided that they just weren't ready to risk $3,000. Nor were
they willing to pay the full asking price. So they took Option
#2. John listed their home on Clearbrook the next day.
Three days later the phone rang. It was John. "Oak Hollow sold
last night for the same price you had offered. The buyer of Oak
Hollow listed their home several weeks ago and it sold last
Gloria's heart sank. All along, in the back of her mind, she had
known that the odds of them selling Clearbrook before Oak Hollow
was sold was an outside chance at best. However, she had already
been living in Oak Hollow in her dreams.
She imagined the children playing in the huge backyard. She had
envisioned cozy evenings, curled up in front of the fireplace
reading a book. And the huge master bedroom! "Oh well," she
thought, "it's all gone now."
When they had started looking for homes, Gloria hadn't realized
that there would be this much stress involved. It was almost
enough to just forget the whole thing, but they had put off the
decision too long already Clearbrook was just too small.
That evening Bob and Gloria talked about what was really
important. They called John and asked to meet with him the
"John, we need to sell Clearbrook," began Bob, "but we just
don't know what to do if we can't find anything we really like
once it sells. We just don't want to be pressured into buying a
home that's not right for us in the short amount of time that
"Well, let's take an objective look at where you are," said
John. "You're not the first clients I've had that have been in
this situation. Let's look at what usually happens."
John continued: "We can list your home for sale with the
stipulation that you can remain living there for up to 60 days
after the closing of the sale. Most sales close 30-40 days after
the offer is accepted. This would give you about 90 days,
perhaps longer, to find another home. It's interesting, but the
house you will eventually buy is probably not even listed yet.
The houses that are listed for sale now, the best buys, will
probably be sold by the time your home on Clearbrook is sold,"
"Why is that?" asked Gloria.
"The good ones sell fast," said John. "Most of the nice homes
listed at fair prices will probably be sold in 30 days. So, if
your home sells six weeks from now, there will be a whole
different group of nice Oak Hollow type homes for sale."
"But how do we know for sure that there will be a home we really
like?" wondered Gloria.
"Well, let's look at it this way," replied John, "you've been
looking at homes seriously for about three to four weeks. You've
seen a number of homes in your price range that you like. You
found one that you were in love with."
John continued, "It's been my experience that when your home
sells, you will find the right one. While there is no way I can
predict what homes will be for sale, I can predict that there
will be a completely different group of homes for sale. One of
them will be right for you."
"But what about the prices?" asked Bob. "What if there is
nothing that we can afford?" John answered, "What I hear you
saying is fear of the unknown. It's difficult to make a move
without knowing exactly what lies on the other side of the
mountain, so to speak. However, there is no way to completely
eliminate all risk and still get a good value. As a matter of
fact, we haven't talked about the biggest benefit of selling
your home first “and that's the power of cash negotiation."
"You see," John continued, "you are already more knowledgeable
than most buyers about Oak Hollow type neighborhoods, prices,
features and value. You've done your homework and have learned
that market. You're experts. In fact, I'd say you know the Oak
Hollow market better than 90% of all real estate agents."
"I'll continue sending you information about Oak Hollow homes
until your home is sold. You'll become even sharper about the
market. When your home sells, you'll be one step ahead of the
great majority of buyers out there. You will have a tremendous
edge. Remember, you're not the only family looking for a
well-priced, nice home in the Oak Hollow area. When an
attractive, well-priced home is listed, you'll be one of many
who want it. Since you've done your homework, you'll be able to
move more quickly and 'pick the plum' before anyone else gets
"What's more is that with your home sold, we'll be negotiating
from a position of strength. Any offer you make will be very
seriously considered, because it's like cash. Your home will be
sold, so there will be little risk for the seller to deal with
because you're already preapproved for a new loan. I'll be able
to bargain on your behalf even more effectively with a
seller. I've helped many buyers get really good deals
using these techniques."
Bob and Gloria decided to take John's advice. Four weeks
later their home was sold. John began updating Bob and
Gloria daily with all the new listings on the Multiple Listing
When a new listing would come through, Bob and Gloria knew about
it the moment it was in the computers. They were often the first
people through the new listings. They kept meticulous notes
about values and features. They had notebooks full of notes.
Two weeks later John called with the news that another Oak
Hollow home was listed for sale. The home very closely matched
Bob and Gloria's specifications. The price seemed to be right on
John emailed the listing to Gloria at her
office. On her way home from work that night, Gloria drove by
the new listing. It was gorgeous on the outside. She
called John and Bob from her car.
Three hours later, John finished writing the offer. Bob and
Gloria had decided to make an offer of 5% below the asking
price. They were prepared to pay at least $2,000 more than their
offer because the home was perfect.
The next morning, John called with good news. Their offer had
been accepted as written. They got the house for $2,000
less than they would have paid!
By selling their home first, Bob and Gloria put themselves in a
stronger position when it came to making a purchase. They could
negotiate better, because there was very little risk involved
for the seller.
Bob and Gloria put themselves in a position where it was very
easy for a seller to accept their offer and ended up with the
home of their dreams.