Buy or sell first?
Juggling settlement without dropping the ball
It’s a common conundrum – how do you balance buying a home while selling the old one?
If it’s your own home that you’re putting on the market, the stakes are even higher. You don’t want to be paying two mortgages, but you don’t want to lack a roof over your head either. In a perfect world, the two transactions would line up seamlessly. Even if you manage to juggle the two contracts simultaneously, other problems can still arise. Contracts can fall through, legal issues can delay settlement, or the other party may request an extension.
Which leads us to the question: Buy or sell first?
If you must do one or the other, what’s the safest option? There is the danger that you’ll have to bend your finances to make the timeframe work. You don’t want to be rushed into paying too much because you have nowhere to live. Similarly, you don’t want to lower your selling price just to make the transaction line up.
Logic dictates that selling first is the safer option
By selling first, you can avoid paying two mortgages simultaneously for an unknown period of time. It also means you know exactly how much money you can spend on the new property. To know for sure, you have to investigate the state of the market, identifying whether it is a seller’s market or a buyer’s market. This, more than anything, can have a huge impact on your decision, because if your home is likely to sell quickly, you’ll need a back-up plan in place to help you cope in between properties.
- Seller’s market: Means these are more buyers in the market than properties available. With plenty of competition for each listing, the best option might be to buy first, assuming that you’re buying and selling in the same market. That way, there’s less pressure to settle for anything less than what you want when you’re shopping for a new home, as you’ll be reasonably confident of getting a good price when you sell.
- Buyer’s Market: In this situation, selling first will help avoid having two properties on the go at once. Whether this is a real issue depends on your financial ability – but it’s a huge expenditure of money, especially if the process takes several months. Selling first gives some wiggle room to hold off for the best price too, since you won’t have the deadline of another settlement looming.
What other things do you need to consider?
- The clock will be ticking to find a new property
- While you’re searching, property prices may increase and could even create issues with buying your ideal home or in your favourite neighbourhood
- Alternative accommodation may need to be found for you and your belongings, which can be costly
- You can wait until you achieve the sale price you want, and you’ll know what you can afford to buy
- You may be able to negotiate a longer settlement time, like six months, to give you some breathing space
- You may be able to negotiate to rent from the purchasers for a set amount of time or until you find a new home
- You won’t need to juggle two mortgages
- You won’t need to worry about renting short-term or staying in a hotel between settlements, which can be a major concern for young families or those who work from home
- A bridging loan is a possibility for some, which will give you the short-term finances to buy before selling
- There’s no pressure to find a home and you can concentrate on a quick and effective sale
- A longer settlement time when selling can ease the pressure of finding a new place quickly. Even if you have to drop your sale price a tad to gain the buyer’s approval, it could save you a lot in interim accommodation costs.
- Find out what the other parties’ circumstances are. You may be able to find a mutually beneficial agreement.
- Use the services of your agent to also help you source a new property quickly. They can often find properties that aren’t even listed on the market yet and remove a lot of stress from the process overall.
email: kooweerup@oneagency.com.au web: oneagencykooweerup.com.au
