Property

Should I buy before I sell?



It’s a question most homeowners will have lost sleep over: do I sell my existing home before buying its successor, or do I buy my next home and then sell?

Almost every home buyer will need or want to move location, upsize or downsize at some point.

So how do I decide if I should buy or sell first?

1. Risk Management

“Working out if you should buy or sell first totally comes down to your own risk profile and risk management,” says the Founder of Property Mavens.

“If someone has a high risk threshold, buying first works best, particularly in a rising market and if you can negotiate a long settlement.

“If you are risk adverse, selling first will suit you better as, to a degree, there is lower financial risk because you know exactly what you have to spend.”

 

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2. Why are you buying and selling?

Are you trading homes to be near ageing parents – or grandchildren – sooner rather than later?

If personal circumstances are pressing, it may be advisable to find a suitable property in a target area and buy it before selling your home, and in a tightly held area, you may have to wait many months to find another property.



3. Market Cycle

It can also be helpful if homeowners can access both their buying and selling markets’ cycles.

“If the market is hot and property prices are rising, you can have a little more confidence to buy first knowing your property is likely to sell pretty easily,” says Sydney-based Mike Mortlock, Director of MCG Quantity Surveyors.

“If the market is falling and time on market statistics are painting a poor picture, you’d be less likely to sell your property in the short timeframe required.”

 

>> Want to know what prices are like in your neighborhood? Check out our listings now!

 

Pros & cons of Selling before Buying

Wally David, Certified Financial Planner from The Smart Money, usually advises his clients not to sign a contract to buy another home until a sale is secured on a current home “regardless of how marketable you think your current home may be”.

“It may necessitate the need to obtain bridging finance or the selling of other assets but for most people selling first is the best strategy for reducing stress and cost in the long run.”



Pros
If you can negotiate a delayed settlement to give yourself time to buy another property and potentially move in before settling your original property. There’s less pressure to achieve the sale before a certain deadline.

Stops potential buyers from cashing in on the fact that you have already bought another property and really need to sell.

Cons
If you’re too picky, you could end up having to move out with nowhere to go. You can always rent short term, but there’s the added expense and hassle of having to move twice.

Prices might go up after you sell and you might be priced out of the market, or not able to find the dream home for the right price.

Pros & cons of buying before selling

Pros
The possibility of negotiating a conditional offer subject to the sale of your own property.

Not being bound by any financial pressure to commit until you find a property that ticks every box.

In a rising market you can potentially get more for your money, and make more from your subsequent home sale.

Cons
The extra cost and stress of bridging finance when you have to finance two mortgages at once.

Conditional offers can turn off vendors and make them unlikely to negotiate on price.

You might need to make a higher offer to convince an owner to hold the property while you sort out your circumstances.

Source: Realestate.com.au
Author: Caroline James