Should I Buy or Sell first?
If you’re considering looking for a new house, and already own a home, chances are you’re wondering what your strategy should be: do you wait to find the perfect house before you put your current home on the market? or do you sell first and then look around? There are a few options. The answer depends on your risk tolerance level and personal circumstances. Review the following scenarios to decide what might be right for you.
SELL FIRST
There are benefits to selling your current house before searching for your next home. Once you have sold your home you’ll know exactly how much money you have to work with. With a concrete price range, you’ll be able to narrow the pool of houses before you begin looking and negotiate accordingly. This will allow you to immediately make firm offers on houses that you’re serious about purchasing. You can be first in line with an unconditional offer you know you can afford, giving you negotiating leverage since Sellers tend to take unconditional offers more seriously. When they counter or turn down an offer that’s conditional on the sale of a home, they usually think the Buyer will come back with a better, firmer offer once they have sold their current home. An offer without that condition will be given more consideration from the Seller as they realize you’re probably looking at other properties and will move on if your offer is rejected. Likewise, if you have already sold you house, you probably do have a wider opportunity to look around, negotiate, and find the best deal and fit for you and your family.
The flip side of this scenario, however, is that if you don’t find the right property before the closing date of the house you’ve already sold, you may have to look for temporary housing until you do find what you’re looking for.
So, before you opt to sell first, you should determine whether you have alternate, temporary option, in case you have to move from your house before you’ve found a new one. How would you deal with living in a transition home for an undetermined period of time?
BUY FIRST
Buying a new house without having sold your current home can occur when a home catches your attention due to its uniqueness or unbelievable price. It could also be that a specific property you’ve always loved comes up for sale and you want to grab it before it’s too late! If buying first means you don’t miss out on the real estate opportunity of a lifetime, it could be your best move.
But… be careful.
If you buy another property and can’t sell your current home quickly enough, you could end up having to finance both homes and shoulder the extra debt until you sell. You can get a financial appraisal or market evaluation of a home prior to selling, but this doesn’t guarantee the price you’ll ultimately receive for the home after the negotiation process has run its course. Since your selling price will be an unknown, jumping into a purchase could be a gamble, especially if your budget is tight.
Make sure you’re familiar with all aspects of the financial reality this scenario would create before you purchase another home. You may be faced with owning two homes at once. What type of financial stress would this bring to your life and how would you deal with it? Consider the fact that if your current house doesn’t sell quickly enough, you may be forced to sell it off at a reduced price in order align the closing dates of your two properties. What effect would this have on your financial situation? The best person to talk through each scenario with is your mortgage advisor or mortgage broker.
CONDITIONAL OFFER
This additional option involves making your offer to purchase conditional upon the sale of your current property within a specified period. Conditional offers usually include a clause that allows for the Sellers to keep their property on the market and remain open to other offers while you try to sell your home. If the Sellers receive another attractive offer before you’ve sold your home, they may accept and ask you to either remove your condition and firm up your offer, or to back down from the offer.
A conditional offer forms a kind of middle ground, an area of compromise, for those who are afraid to sell or buy first—but doesn’t hold the advantages of the other two options.
One of the drawbacks of the conditional offer is that Sellers tend to take them less seriously. They give stronger consideration to firm offers. This leaves you with less negotiating power. In fact, some Sellers will simply turn down or counter a conditional offer. Other Sellers will believe the Buyer will come back with a more serious offer when their home has sold. So, you may end up having to increase your offer in order to have your conditional offer accepted and keep your foot in the door.
Even if your conditional offer is accepted, there is no guarantee another Buyer won’t step in and overthrow your offer before you have sold your current home, which would put you back at the starting line.
Also, consider the fact that you cannot withdraw your conditional offer until the end of the period specified in the contract—which means that if a better deal comes along, you will have to wait to jump at it.
IN CONCLUSION
How you decide to proceed is up to you. Let’s discuss first which option you’d feel most comfortable with and secondly which option makes the most sense based on your current home condition, location and the current state of the real estate market in your neighbourhood.
Reach out to arrange a time to chat so we can get started!