When it comes the answering the question “Is It Best To Buy First Or Sell First?” – the answer is going to probably be whatever is the right answer for you and will likely depend on the current state of the property market in your area.
Buying or selling a property can be stressful no matter which way you look at it. If you’ve spent several years in your current home, you may feel a bit like a first home buyer all over again when it comes time to sell.
You’re also likely to be faced with the age-old dilemma that affects every home owner considering a downsize, upsize or relocation: Is it best to buy first or sell first? Should you sell your current property first and then buy your next home, or should you find your next house first and then try and sell your current one.
Buying your second (or subsequent) house often isn’t any easier than your first and looking to sell your property at the same time can make things more complicated. Buying & Selling can also take a lot of time out of your life, so the best thing to prepare is to make a plan.
There’s no right or wrong way to tackle it, but you need to think about your appetite for risk. Both options come with pros and cons and their own unique set of challenges and pressures.
Buying First Before You Sell
Buying a house first gives you the luxury of time. You’re free to hunt for homes without any threat of a looming settlement date on the horizon.
You’re able to consider as many houses as you like and can move at your own pace. Doing it this way lets you keep searching until you find the property that’s just right for you.
Whilst time might be on your side, your finances might not be. To secure the new home, you’ll need to come up with money for a deposit which might be tricky if all your equity is tied up in your existing property.
Deposits are also normally paid either on acceptance of an agreement or when a property is declared unconditional, so if you’re wanting an agreement for the ‘new property’ to be subject to the sale of your current property, you should ask the agent to make the deposit payable only upon you becoming ‘unconditional’, which means you wouldn’t need to front up with a deposit on your purchase until any offer on your existing home was also declared unconditional (which would mean your current home has been sold and you may have access to the deposit funds from that sale to pay the deposit on your new purchase)
One of the main issues in looking for your ideal home whilst you still own your current home is the state of the property market. What we mean by that, is that, if properties are selling like hot cakes, then the likelihood of a seller considering an offer from you ‘subject to selling your current home’ is highly unlikely, because in a heated market, buyers with ready cash, happy to pay the price at a level similar to your offer are usually quite plentiful.
On the other hand, when the market is quiet, and what we consider a ‘buyers market’, the opposite is often true and you can almost certainly secure an agreement with a seller on your next property, subject to selling your existing.
One of the downsides to this strategy is that you often get your heart set on the ‘new property’ and quite often a seller will insist on a cash-out clause in your agreement with them, meaning, if someone else pops up with an offer deemed better and cleaner than yours, they can invoke the ‘cash out’ clause effectively giving you only 3-5 days to ‘go unconditional’, otherwise the other offer would be chosen over yours.
This often results in the highly risky decision of ‘going unconditional’ when you haven’t sold already, or alternatively a lot of heartache because you miss out on a home you had your heart set on owning and you’re left high and dry with your current home on the market.
If you are in a financial position where you can afford to temporarily own the two properties at the same time, then buying the ‘new property’ first you may land you with additional costs to consider, such as home insurance, rates and utility bills, as well as absorbing the cost of any bridging finance to pay two mortgages, assuming you buy before selling.
The extra financial strain can also sometimes mean sellers pressure themselves into setting a modest listing price for their existing house or potentially accepting a lower offer, just to seal the deal quickly.
Selling First Before You Buy
Selling first can give you a clearer picture of your financial situation. You’ll know exactly how much money you have to play with and what you can afford to buy.
However, once you’ve accepted a buyer’s offer on your property and that becomes unconditional, the clock starts ticking towards settlement day.
You may potentially feel added pressure to make an offer on a home that doesn’t quite fit your needs or wishlist, because you’re so focused on finding a new place to move into.
One way of possibly avoiding this is to try to negotiate a long settlement period on your own house – your agent can help with this. This can buy you some breathing room and a reasonable time-frame to find a new property. However, this isn’t always possible, so it always pays to consider what your Plan B will be.
It can sometimes be a challenge to find short-term accommodation, especially when you aren’t sure how long you’ll need to live there. Do you have family or friends you could stay with? Is your buyer willing to allow you to stay on temporarily after settlement for another month or two?
There may also be added costs of moving your belongings twice and paying for storage while you’re in between properties. You just need to be prepared for some of these uncertainties.
One positive, though, with this strategy, is that you will likely have sold for a great price, because you weren’t under the same pressure as you would have been if you’d purchased your ideal subsequent home first.
The Best Option For You?
The vast majority of people we normally deal with on a day to day basis usually understand the pro’s and con’s of both strategies and make the decision to sell first before they buy, however, the ultimate decision is yours and usually one made after a lot of careful consideration.