Should I Buy or Sell First?

Are you thinking about buying a new home? If so, you may be wondering about the logistics of selling your old home. Which should you do first – sell or buy?

The Dilemma

‘If I buy first, I just might not be able to sell my current place, and if I sell first, I just might not find a suitable property to buy.’   So, what should you do?

There is no ‘right’ decision, but it’s important to know the potential consequences of both routes. Speaking with your real estate professional before starting the buying or selling process can help you decide which route is better suited to your circumstances.

Here’s a foolproof way for you to decide.

Determine which of the following would be the most difficult for you right now, in today’s market. Would it likely be more difficult for you to sell your home or more difficult for you to find a home to buy that fulfills your needs?

Then do that which is most difficult first.

Understanding the Current Market

Understanding the real estate market can be tricky. Not only does the market constantly shift but what is happening in one neighbourhood at one price point can be drastically different than what is happening in another neighbourhood at another price point. And what we see happening in the freehold market (detached or semi-detached homes) can be different than what we are seeing in the condo market. 

Agents are at the forefront of this activity and have direct exposure, so it is best to speak to one to accurately understand what you can really expect within the criteria which applies to you.

Selling First: Pros and Cons

Pros:

• Can sell for the amount you find acceptable

• Know how much money you have for your new purchase

• Can time closing to avoid bridge financing

Cons:

• May feel pressured to make a rushed purchase. This can be mitigated with a        long closing.

By selling your existing home first, you will know how much money the sale has brought in. That will help determine how much you can afford to pay when you buy your next property. However, if you experience difficulties with finding a home to purchase, you may end up rushing the process and buying a home that isn’t ideal for you, or paying more than you planned for one that is.

If you decide to sell your existing home first, have a contingency plan should your dosing dates not align. This may involve staying with family or friends, finding a short-term rental or negotiating a longer closing period.

Buying First: Pros and Cons

Pros:

• Able to calmly find, negotiate, and secure a home

Cons:

• You don’t know what your home will sell for. Mitigate by using a realistic selling  price for your home when determining your budget.

• Feel pressured to sell. Mitigate by buying with a long closing

Depending on market conditions, the type of home you wish to purchase and the popularity of the area, being able to buy first allows you to wait until the right home comes up for sale. In a heated market where you may encounter bidding wars, it can also be less stressful knowing that if you do not get the first home on which you make an offer, you have time to wait until another one that meets your criteria comes up for sale.

However, market conditions can also impact the sale of your existing home. If you have already purchased a home and are unable to sell your existing one in a timely manner, you may face difficulties in securing a mortgage for the new home or may have to pay two mortgages for a period of time. Additionally, you may feel inclined to accept any offer that comes in, even if it’s lower than what you believe your home is worth.

Reducing the Risks with a Conditional Offer

One way of minimizing the risk in this scenario is to include a SOBP (Sale of Buyers Property)  addendum when buying your next home. That means your offer is conditional on the sale of your existing home, typically within a given timeframe.

As a buyer, including such a clause may be comforting, but some sellers may be reluctant to accept these types of offers due to the uncertainty of when the offer will become firm. For this reason, conditional offers typically contain an escape clause for the seller, allowing them to cancel the offer under certain conditions.

If the seller does accept a conditional offer, they can typically continue marketing their home to other prospective buyers until the original offer is firm. If they are successful in receiving another offer that they think is superior, they would have to let the original buyer have an opportunity to waive the conditional clause and firm up the offer. If the buyer is unwilling to waive the condition, their offer is cancelled and the new superior offer can be accepted.

Market conditions

In a Seller’s market it will virtually be impossible to have a home owner agree to a conditional offer due to the fact that more buyers competing for fewer homes tilts the scales in favour of the Seller and as such, less incentive for them to accept such an uncertain condition to an offer.

No matter which route you choose to go, it’s important to remember that a licensed real estate professional is knowledgeable about market conditions and will offer advice and solutions to guide you through the process. They will be able to discuss various scenarios to make sure you have realistic expectations about what may happen and how to be ready should a setback arise.

Speak with Assist  2 Sell  to help you determine whether buying or selling will be more difficult. From there, we can help you come up with a good plan of action. However, no matter which you do first, you’ll want the timing of both your purchase and sale to occur in the same general marketplace timeframe. We can help make that happen. That is what we are trained to do. Put our experience to work for you.