TO BUY FIRST OR SELL FIRST? THAT IS THE QUESTION…
Many of our clients find themselves in the dilemma of buying first or selling first, and there is no universal answer. We hope this article will give you some clarity on the questions to ask yourself when the time comes for your next purchase or sale.
Let’s assume the seller will not consider a ‘subject to sale’ offer… because if they will, go this route and don’t read any further. The negatives of a ‘subject to sale’ offer is that you could get bumped by another buyer, and in many cases a ‘subject to sale’ offer reduces your negotiating power as you’re not a ready to go ‘cash buyer’. Note that not all ‘subject to sale’ clauses written the same. The wording is crucial, and there are rare situations where you get bumped from a purchase (by another buyer) and end up selling your place anyway… call us to avoid this!
To Buy or Sell first? The main items to consider are your personal risk tolerance, finances, the subject properties involved, and the market.
Here are a few questions to ask yourself:
1) What is your risk tolerance? Will you sleep at night if you buy a property before having sold your own? If you buy first (and need to sell), you have to take whatever the market will bring. Plan conservatively. Make sure the purchase is feasible with a lower than expect sale price of your current property (maybe 5-10% below market).
2) How are your finances? Are you stretching yourself to make this purchase? or can you afford to carry two properties? If you’re stretching yourself on the purchase and you require top dollar for the sale of your personal property, it may make sense to sell first so you know exactly how much you can afford. We don’t want you to lose your deposit by committing to a purchase that the banks won’t finance (more likely for up-sizers or first time ‘House’ buyers). However, if you’re downsizing and are financial able to support the carrying costs of owning two properties, than buy when the perfect property is available.
3) What are you buying? Is it rare? If you find yourself looking for a property that’s on a certain block, or maybe a penthouse condo, or waterfront property that rarely comes available, you may not have a choice but to buy first or lose the property. If the property type you’re looking for is readily available (or maybe you’re just not picky) and it’s just a matter of time before the next one comes up… it may be best to sell first and put yourself in a strong negotiating position.
4) What are you selling? Is it very desirable, or is difficult to sell? If you have a very desirable property that would sell quick, it may make sense to purchase first. Alternatively, if you have a fixer upper, luxury home or busy street home (anything with a negative or very limited buyer pool), it may make sense to sell first.
5) How is the market? Is it hot or cold? In the hot market we experienced in 2016 everything sold fast, and as a result our clients were often buying first. In a hot market, sales are more predictable and risks of buying first is much lower. If the market is cold, like we’re experiencing now (2019), it’s typically best to sell first unless you’re prepared to own two properties.
Buying First: PROS
– You know where you’re going and when your Completion date is.
– Less likely to move twice. The challenge is to sell your place and match up the dates.
Buying First: CONS
– More financial risk, and potential loss of deposit (if you’re unable to sell current property).
Selling First: PROS
– Less financial risk.
– You know exactly how much you’re getting for your property, and will have a clear budget for your purchase.
Selling First: CONS
– You may not find a suitable place to buy right away. Be prepared to find temporary accommodation and move twice.
At the end of the day, every situation is different and needs to be evaluated on an individual basis. This is where we can help.’
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