And........unless the law is extended, as of December 31st of this year, (2012), the Debt Forgiveness Act is going to expire. The ramifications of this are that the bank can then report your deficiency to the government and it could be added on to your yearly income which would cause you to owe taxes on that difference in the event you have a deficiency.
A refinance of your condo is going to require an appraisal unless someone is willing to pay cash. If it doesn't appraise, no refi. It has been my experience in the past several years that condos are extremely difficult to move right now.
Arm loans are very risky and I would not advise them. That is part of what got us into this mess in the first place. No one can tell you for sure how things will be when that arm comes due. Chances are, if you cannot afford the payment on a conventional loan right now, you won't be able to in two or five or ten years from now.
I would strongly advise you to seek out expert advice from an accountant, financial adivisor and/or perhaps an attorney. You are contemplating something that has the potential of becoming a disaster.
The simple answer - if you are asking forgiveness of the remaining mortgage balance on the condo you should buy first. If you were planning on bringing cash to close to complete the sale of the condo then it doesn't matter.