If you have thought about moving in the near future, you’ve probably mapped out a plan forward. At first glance, the process seems simple.
First, sell your home and then start the process of buying a new one.
Or should you buy a new home first, then sell yours? It turns out; the best path isn’t as simple as it seemed.
Your decision to sell first or buy first will depend on a few different factors
Current real estate market conditions
We are in a strong seller’s market right now, which means finding a new home will likely be more challenging than selling your current one.
Your risk tolerance
You’ll want to take a close look at your finances and know the market so you can move quickly.
Where you’re selling and where you wish to buy.
If you’re planning to sell a condo downtown and upgrade to a detached home in a suburb, you’ll need access to more funding. If you’re moving away from the city into a more affordable area, your options can be more flexible.
Your resources if things go sideways.
Complications like rising prices, delayed closings, bidding wars, and tight moving schedules can happen. A contractor can get backlogged, leaving you without a much-desired renovation. All scenarios are less stressful when you have a plan in place to deal with them.
Even in a seller’s market, there are little things you can do that will help you enjoy better results. Here are some ideas:
- How To Prepare Your Home When You Have No Time
- Tips To Make Your Home Appeal To Young Buyers
- Staging Secrets Revealed: Our Top Boutiques For Beautiful Furniture And Decor
2 things you can count on in a strong seller’s market
- Selling your house will likely be a smooth, seamless process. Buyers will line up, you may have multiple offers to choose from, and you’ll sell quickly (with the help of the right real estate agent, of course.)
- Buying your new home will be more of a challenge. You’ll need to scout out several properties in advance so you can act quickly once you find one that suits your needs.
The question is, what should you do first? Sell or buy? Both options come with advantages and risks.
Buying First: The Pros and Cons
In a perfect world, you would buy first. Why? Think of the old investment adage, “Buy low, sell high.”
We are in a strong sellers’ market that shows no sign of slowing down. Most real estate professionals predict that prices will soar even higher in the coming year. Securing your new house now means paying the lowest possible price.
Then, if the value of your current property continues to rise, you’ll earn more by selling later. This is an excellent way to build your equity because chances are, the house you just bought will also increase in value.
Buying first also gives you more options because you have time to research and find the perfect home. You don’t have to worry about moving when you have nowhere to go.
What are the downsides of buying first?
The number one obstacle for most people is cash flow.
Very few people have the resources to buy without first selling their current home. Less cash in hand makes it more difficult to finance your purchase, and sellers might reject your offers.
There is also the slight risk of your house losing value and selling for less than you thought. It is unlikely in 2022, but the market is unpredictable, and anything can happen.
If you have a healthy risk tolerance and a high budget, buying first makes sense.
You can reduce risk by following the market closely and knowing the value of your home before you start. You should also be ready to sell fast when the time comes. This means making minor upgrades to increase the value of your home, keeping everything spotless and proper staging.
What happens when you sell your house first? How Jeff and Carolyn Found Their Forever Home With Ana Santos
The Pros and Cons of Selling First
If you sell your existing home, you know exactly how much you can afford when you begin house hunting. You won’t risk overspending and putting yourself in financial distress.
Plus, you don’t have to worry about the financial strain of paying two mortgages at once.
Also, having the cash from your sale puts you in a solid position to move forward on your desired property.
In this market, sellers often have multiple offers to choose from. They’re more likely to accept your offer over someone who still needs to obtain financing. Selling first can push you to the top of the preferred list.
What are the risks?
The market is moving fast, and it might be tough to get back in after your home sells.
When placing an offer, you’re often in stiff competition with other buyers. You can end up in a bidding war for your desired property.
The other disadvantage is that you’ll have a firm closing date for when you need to move out. It doesn’t give you much time to find and purchase your next home. If you can’t find one fast enough, you might be without a place to live.
However, there are ways you can mitigate these risks.
Make sure you research the areas and know where you want to buy before selling. You might consider looking in a more affordable neighbourhood to expand your options.
Have a backup plan if it takes longer to purchase than you hoped. Check out your local rental scene, just in case you need more time. Perhaps you can even stay with a relative while searching for a house on your terms.
Whether you choose to buy first or sell first, a knowledgeable real estate professional can guide you through the best options.
Want to know our best-kept secrets for buying in a tight market? Check out this case study of a very happy buyer: Buying a Home in Toronto’s Tight Real Estate Market – A Case Study