A frequent question from home owners is whether they should sell first or buy first, which way is better for them, and how to know…
The question of how to proceed does come up because sometimes in a competitive market homeowners are worried they’ll miss out on their rare dream home if they wait until they’ve sold their existing property.
It’s a worthwhile question and the answer largely depends on your individual situation but here are some considerations you might have when making your decision.
Some homeowners are reluctant to list their home for sale without having already bought a new property in case the settlement period comes and goes and they are left essentially homeless and forced to find (and pay for) temporary accommodation.
On the other hand, they are missing out on their next house time and time again as they cant win a tender with their offer being subject to them first selling their own house.
So which way is actually better and how to know?
Unfortunately, there’s no perfect answer to this, but the key variable in what will work best for you is how much finance you have at your disposal, and to a certain extent, how committed you are to actually being able to make the move you want to.
In a market where supply and demand are reasonably balanced, selling your existing home before you buy tends to make the most sense. It means you know exactly how much you have to spend when it comes to shopping around for your new home.
If you have your home completely sale-ready when you list, you can spend the time scheduled for your open homes, visiting other properties for sale.
It’s also a good idea to do some looking around before your own property is listed, so you have a clear idea of what you want – or don’t want, where you want to be, and how much you’re prepared to pay.
Have your finances in order as much as possible based on the asking price of your own property so when you’ve sold or close to selling you can move quickly on your preferred new home.
It does get a little more complicated when the market is heated, such as it currently is in several regions around the country.
Many home owners feel that buying before they’ve sold is the only way they’re able to compete for hotly contested properties, and it gives them the reassurance they won’t be shut out of the market and left without a roof over their head.
The obvious trap here is the risk of over-stretching yourself financially if you are forced to accept less than you hoped for your existing property and you have no nest-egg to tide you over. It’s worth remembering too that if you’ve already bought, you may be persuaded to take a lower price just to sell quickly.
Furthermore, if you are not in the fortunate position to be able to buy your next home without selling your current property then aiming to buy first invariably means your offers to home-sellers will be subject to you first selling your property. This condition makes your offer much less appealing than another offer which is not subject to this condition.
An approach that I have used is with a clients approval is to list their property for sale with a long settlement date of several months which gave them time and confidence to buy, plus great negotiating presence in the market.
In this situation the incoming buyer can win too, as although they have to wait a little longer to move into their new home, they lock in the property at todays price but realise any capital gain on moving day.
Bridging finance – a temporary mortgage to pay for the new property until the original property was sold – was one way to traditionally off-set the shortfall between buying and selling but that has been complicated by the introduction of LVR restrictions for property investors. Until banks receive some clarification and guidance around this loophole, open bridging finance is off the table for most homeowners.
Although closed bridging finance – when you have at least a settlement date for your existing property – is still being offered.
(Click HERE for more commentary and information on Bridging Finance)
(Click HERE for Jenny Cheevers contact details. Jenny is a reputable mortgage broker who can help you with your financial situation and will be happy to assist, just mention this blog sent you)
If you do end up buying first but haven’t yet sold in time you can possibly consider other options such as putting short-term tenants into your unsold property to help offset the costs while it’s on the market. Though you’ll need to be clear about making sure the property is always tidy for inspections and on the basis the property is on the market.
I can also talk to the selling agent for the home you want to buy at any time on your behalf to see what time frames you can work out around settlement dates that give you the maximum reasonable amount of time to sell your existing property. Even at auctions, which typically have a 30-day settlement period, you can sometimes ask if the vendor is happy to extend.
(Click HERE to view the Harcourts Auction Variation form which we would need to have the vendor acknowledge prior to the auction.)
In short, there’s no perfect answer to the question of whether you should buy or sell first but the best approach is do as much research and preparation as possible before listing so you’re ready to move quickly if need be. And keep me appraised of your time frames. That way I can help make it all fit together.
In any case, whether you decide to sell first, or to buy first, you absolutely need to know what the market value of your property is today. I can give you all the detail that’s important to you and entirely at my cost, just let me know your address and I will take care of the rest.
The market is moving, even in as short as one month we have seen considerable value increases in some markets.
If you need any further information or commentary on local real estate matters just get in touch, click HERE to send me a message.
Thanks a million for reading and I hope it was of some use, please click HERE to go to my facebook page, click like, and keep your finger on the property pulse.
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