Moving house is one of the most stressful events in a person’s life – even though it is usually, overall, a positive one. When the time comes to move from one home to another, there are many decisions to make; for example, whether to sell your existing house or to buy a new home first. Unfortunately, there’s no clear-cut answer that can be applied to everyone. It’s helpful to take a closer look at the advantages and disadvantages for each option; which will help you make the right decision for your unique situation.One of the variables that could affect whether it’s better to buy a new home, or sell your existing one first is the current state of the market. Although with the right amount of research across a number of areas, you can get a pretty good idea yourself; it’s still generally much easier to discuss this with an experienced real estate agent before you make any decisions. A professional real estate agent will help you can narrow down which option will suit you best in light of the house you have, the kind of houses you are looking for and the current market conditions in your area.
The following is a brief overview of the pros and cons of both buying and selling first:
Selling a Home First
While it’s nice to think that you could potentially sell your existing property and then be ready to purchase and move into a new property just a few days after settlement, it’s quite rare to experience such a smooth transition. The paperwork for both of these transitions can take quite a long time, meaning that if you sell first, you’re likely to spend some time in transition. Selling your home first has less financial risk, because it allows you to know exactly what you’re working with in terms of budget. If you purchase a new home without selling your old one first, you’ll have two mortgages to pay and additional burdens that come along with owning two properties – even if it is just for a short while.
Another benefit of selling your home first is that you will be better situated to make a sale if you don’t have another home already: there’s no pressure to sell by a certain deadline, which gives you the time to work out the most effective marketing strategy and wait for the right price. By contrast, if you have already bought a home, you may feel like you need to settle for the price you are offered and make that quick sale, in order to save money on settlement day.
Of course, there are a couple of downsides to selling your home first. If you are unable to buy a new place in time for the settlement date; you and your family will need to find temporary accommodation until you are able to purchase a new place. This can be expensive and stressful since you will need to go through a full move more than once. You’ll need to pay rent (or hotel bills) along with the cost of moving twice and probably for storage space too, which can add up quickly. One way around this is to consider agreeing to an extended settlement when you are negotiating your sale, but remember that some real estate agents or buyers won’t want this. An extended settlement allows you to sell your house first but still have a bit of extra time to find a new place.
Another potential downside to selling your house before buying a new one relates to the local market: there’s always the possibility that property prices will go up between the time you sell and the time when you are able to purchase a new home. Should this happen, you will probably spend more on your new home than what you were able to gain in your sale. Our article, ’When is the right time for buying property?’ covers this topic.
Buying a Home First
The other option is to purchase a house before you have finalised your sale. This is the safe option to choose if you don’t have financial constraints, because it ensures that you and your family will have a place to live immediately. A major benefit of buying a home first, if you can afford it, is that you can move all of your belongings directly into the new house and not have to deal with intermediate storage or accommodation. This also allows you to take as much time as you need to sell your old home, which can be staged to increase its appeal while you live in your new home.
The major drawback in buying a home first is that it takes a certain level of financial comfort to make this a possibility. There are additional costs associated with owning dual properties, including having to pay two mortgages and higher taxes. You’ll also need to be able to put down money for a deposit on a new property, without having any money from the sale of your current property to help.
One option for this type of situation is to apply for bridging finance. This is a loan that is designed to help bridge the gap between when you sell your house and when you buy a new property. It’s similar to a regular home loan, but usually incurs a higher interest rate and is set for a shorter term – generally no more than 12 months.
An added risk to buying a home first is that you don’t know whether or not you will be able to cover the full cost when you sell your old home. A possible option is to rent out your old property for a certain period of time before selling it, to help make up some of the costs of your new home in rental income. This also buys you more time to analyse trends in the property market, so that you can sell at the most opportune time.That said, if for some unforeseen reason, your old home fails to sell or sells for much lower than expected, you could be in a very difficult situation.
Another option is to make a conditional offer. This is a compromise between the two former options that allows you to purchase a property with the condition that you are able to sell your house within a certain period of time. The seller is able to accept other offers during this time frame, so it isn’t the safest option if you really have your heart set on the new place as another buyer may take it from you. Whether or not this is a possibility will depend on the seller of your new home. Some sellers may choose to reject conditional offers in favour of something more concrete. They will also have the option of choosing a better offer at any time, which will leave you back at square one. However, in the event that you are able to make a conditional offer work for you, it could save you a great deal of difficulty and money.