This week we’re talking about a tricky situation. What do you do when you need to buy a new home and also sell the one you’re living in? This can come up for those who are upsizing, downsizing, or moving locations. Since COVID has had a big impact on the way people are experiencing living in their homes and the city, we’re now seeing a push from for more outdoor space, homes large enough for quiet home offices, and more uncrowded access to nature and parks.
Now back to business. So if you need to do a dual transaction (buy and sell), which should come first? In general there isn’t a single rule that applies to every situation. Ideally you want buy low, sell high, but no one has the crystal ball to predict the market with certainty. It’s best to aim to buy and sell in the same market conditions as much as you can. From here, look at each situation individually. Consider your finances, risk tolerance, and local market trends. Let’s break it down further.
Selling First
Start with looking at how hard it will be to sell your property. Speak with a trusted Realtor about the amount of interest in a home and neighbourhood like yours over the past few months. Have a frank discussion about the desirability and limitations of your property. Look at local market trends and the likelihood of selling your home in a given time period for a given price point.
Always be conservative on your numbers and then any surplus is icing on the cake, instead of putting you in a precarious spot. There are a variety of reasons a home might be a challenge to sell (maybe there’s a ton of supply that’s similar on the market right now; maybe there isn’t a lot of demand for this type of home, or maybe it’s a-typical for the area, the list goes on….).
If it looks likely that it will be a difficult task, then you’ll want to heavily consider selling as your first step. If it looks like your property should be a piece of cake to sell, then you have options.
Advantages to selling first:
- You know exactly how much money you are working with for your purchase
- You aren’t time pressured to take a subpar offer and have more flexibility to wait for the offer and terms you want
Risks to selling first:
- You now have a deadline to find your new home and may have to choose under stress (trying to get a longer close can help mitigate this, but then you are more at risk of the market shifting)
- It can be unsettling not knowing where you will be living next once you’ve sold
Buying First
If it looks like you will be able to sell easily, then you can consider if you want to buy or sell first. Next, examine how tricky it will be to secure the type of home you want. How rare is your ideal home? Is it a unicorn or have there been a lot of options on the market recently that would make you happy?
Find out exactly how many homes like your ideal have sold in your desired neighbourhood in the past few months, and past year. What have the conditions been for these sales? Have there been mostly bidding wars and an ultra competitive environment?
With some data and guidance, you can evaluate if it seems likely that you can find a good fit in a typical closing period (60-90 days).
Advantages to buying first:
- You can take the time to find and secure your perfect property
- You won’t be rushed into taking an offer out of necessity
Risks to buying first:
- You’re now under pressure to sell your home under a specific time frame and risk being forced to accept an offer that isn’t ideal
- You don’t know exactly how much your home will sell for
With either approach, take time to evaluate what works best for you and how you feel about the worst case scenario. If you have a lot of financial security and are very particular about your next home, then buying first can be a great strategy.
If your home is going to be harder to sell, you don’t have a financial safety net, and your next home will be easy to find, then it makes sense to sell first. Have an honest discussion about what works best for you and understand that either way there will be some risk and pressure. Your agent’s job is to offer guidance on how to best mitigate this.
To read more about the home selling process and request my free Home Seller’s Guide, get in touch with me here.
Photo by Michael Anfang on Unsplash
