You Want To Buy A New Home So Now What? Should You Sell First Then Buy?
The market has shifted, it’s now balanced but you still need to be aware of the pros and cons of the ultimate question: “I want to buy a new home so should I sell first and then buy”?
It’s a tough call to be sure and it’s important that you understand all the implications that are associated with all the answers. So let me begin.
• Market Conditions
We are definitely in a balanced market with a slight lean towards a buyers market but don’t let that fool you, as this can increase the time your home sits on the market. As a result if you sell before you buy it ensures you won’t end up with two mortgages, always a plus!
There is another equally important consideration; selling with a looming closing date on your home puts undue pressure on you to jump on any offer. Selling first provides you the luxury of considering each offer carefully and negotiating more favourable conditions. Remember, conditions are showing up in offers again, a sign of a balanced market. As a buyers market, inventory is high, so you have more choice when you start your search. This allows you to feel confident during both the buying and selling process so you don’t have to settle.
Possible exceptions: We rarely see any exceptions to this scenario of selling before you purchase.
• Your Financial Position
If you have a mortgage balance (and most of us do) and your finances are tight, selling first is best. This avoids the risk of having to carry two mortgages. You can sell your home, know exactly how much money you have to spend on your new home and avoid the stress of not selling.
Possible exceptions: If your mortgage is paid off or you enjoy a healthy cash flow within the household the risk of buying first isn’t as high. In that particular case, if you are looking for a very specific type of home that may take longer to find, you should potentially consider starting your home search first.
• The Condition of Your Home
If you have a home that is turn-key and needs a marginal amount if any work at all, selling it will be relatively easy even in a buyers market. Have a realistic expectation of current market value and price the home aggressively and it will sell, especially if it is located in a desirable neighbourhood. All key factors.
Possible exceptions: If your home has been over-renovated (lets face it we have all been there) with unusually high-end finishes for the area, you may find that it takes a bit longer to sell your home without taking a hit on the price. On the flip side, if your home is in need of repairs, this will also have an impact on how long it takes to sell.
• CONFIRM EVERYTHING
About 4-6 weeks before closing, confirm that everything for financing and closing is in place, including
Movers have been booked
Call your lawyer to ensure they have everything they need, including mortgage approval documents
Ask your mortgage broker if they require anything further and have them send you a summary of costs and deductions
What Conditions Can You Put In An Offer To Protect Yourself?
• RISKS:
Buying first tends to present higher risks:
You increase your risk of carrying two mortgages
You might be more inclined to accept lower than market value offers or less appealing conditions out of desperation
Possible exceptions: If it was still a smokin hot sellers’ market, it most often makes sense to buy first and list your property once you have a firm deal. This is because inventories are lower which increases the risk that you won’t find a home before your closing date…. And then what??? This is everyone’s (mine included) worst nightmare, a family homeless because they can’t find their dream home.
• Clauses & Conditions:
Also, if you can’t resist putting an offer in on your ideal home before selling, we can add a condition in that your offer is contingent on selling your home first. Just note, this condition can end up causing a lot of stress it’s always associated with an “escape clause” which translates to this: the property you have the offer in on will still be allowed to be offered for sale. This means a potential secondary offer could come in and if it looks more palatable than your offer the sellers could exercise an “escape clause” and all of your conditions will have to be removed within 48 hours (standard timeframe for this scenario) A seasoned agent has been through this situation many times and I can assure you they are HIGH STRESS for all parties involved.
Ultimately, before you make any decisions please feel free to reach out and we can have a discussion on your situation and come up with a strategy that would optimize your sale and purchase outcome.
If you are thinking of selling and would like further information to prepare your house for sale I would be happy to forward my Sellers Guide.
