Should I Sell or Buy First?

Should I Sell or Buy first?

Unless you’re a first homebuyer or new to the state, the chances are you will have something to sell when buying your second home or subsequent property.

So! If you must sell as well as buy, which one should you do first or doesn’t it matter?

Buying First? Choosing to buy first means that you have plenty of time to find the perfect property without any pres-sure. You can then make your offer and once accepted put your property to the market.

The benefits of buying first include;

1. If the market is rising, you may be able to lock in a great deal and sell your property at a higher price. To do this you will need to either get the seller to accept your offer with a long settlement or have the finance and be prepared to pay interest for the term of your marketing and through until settlement.

2. You will never be ‘out on the street’ as you know where you are going and by when you will need to be there.

3. The possibility of having to rent or move in with family or friends as an alternative to street dwelling is avoided, as too, is two moves and the associated expenses.

The downsides of buying first include;

1. Sometimes we believe that we have the best home in the area and that it will sell itself. “Everybody loves my home”. The problem is that when it comes to parting with money even your friends might become more circumspect.

2. You don’t know your exact budget. This becomes particularly important in a falling market or a buy-ers’ market. If the market falls away quickly it could leave you with thousands of dollars more on your mortgage.

3. If you decide to go down the bridging loan path, you could find yourself with two mortgages to pay.

4. If you have bought and have a settlement date looming then you will be under pressure to sell and settle by the same date. This means that you may feel pressured to accept an offer that is less than you would have liked to achieve.

5. Offers made Subject to the Sale of another property is not attractive to most sellers. Therefore, they require compensation for taking that risk; You finish up paying a premium.

6. The overall experience can be considerably more stressful and time sensitive and can cost you more dollars overall.

 

Let us now consider the alternate strategy, selling first....

Selling your home first allows you to be in control of the process and the facts.

1. Let’s assume that you believe that your property is worth more than the market is prepared to pay. If you do all your calculations on this, you could be seriously out of pocket under the first strategy. Under this strategy you can get to the stage where you have an offer on your property and before accepting it, check that you can still afford the type of home that you want in an area that is acceptable with full knowledge of your financial position.

2. Selling first allows you to accept offers that are more favourable to you and you can negotiate harder for a better outcome. The pressure to accept a lower offer is greatly reduced by this strategy.

3. Once your property is under offer you can go shopping with confidence for you and the seller of your new property, that the sale will settle. This may allow you to negotiate a better purchase price or more auspicious terms and conditions, than if your offer was subject to a sale.

4. Selling first in a falling market might allow you to buy better and leave more money in your pocket.

5. Given that you are the seller and generally more in control of the process, you may be able to negotiate a longer settlement to your sale allowing you to take your time in finding the next property. Sometimes however finding a buyer that can provide this level of flexibility might take a little longer.

The risks associated with the sell first strategy;

These include;

1. A rising market could mean that you are left with either a larger mortgage or could even find yourself priced out of the market.

2. If your sale is going to go through, then in the absence of any other negotiated time frame, you may find yourself having to move twice, something that can cause great stress for you and your family, or two moves. 

The recommended method is sell first, buy second. This will usually provide the best outcome of higher price, lower hassles and lowered stress. Moving to a new house is however a major project and you need a good project manager. It is here that a good real estate agent can add value.