It would be a good idea to consult with a real esate professional to develope a plan of action. It sounds as though selling first would be your best option, especially where you can rent your friend's condo. This would allow you to wait for the special home. Would your friend be willing to rent month to month, or ask you to sign a lease?
The best option is usually to focus on selling 1st. It's a tough market, and a great Realtor can help organize a "united front" with your help, and get your property sold. Once you have a buyer, and have made it past the home inspection period, and increasingly perilous financing committment deadline. Begin your search, and hopefully you can make up the hit that you take on the sale of your condo, in the price of your next home. Remember, if they are selling now as well, market conditions affect them as well. Of course there are no guarantees as every property has a unique back story and set of circumstances.
2. Even though you will get less for your condo now you will also pay less for the new home - so basically a trade off. With interest rates low and tons of inventory you are sure to find what you love.