It’s a question we get asked pretty frequently. In terms of planning your next move, is it better to buy your new home before selling your existing property? Or, should you sell first and then plan to buy later.
The answer, like many things, depends.
What exactly does it depend on?
A few things, actually. For example, you should consider the current real estate market conditions, what your goals are right now, and your relative comfort with risk-taking.
Let’s take a closer look:
The Current Real Estate Market
Right now, we’re in what is known as a ‘seller’s market.’ You’ve probably read about it by now, but this type of market condition occurs when the demand outpaces the inventory. In short, there are more buyers looking for homes than there are available properties for sale.
This market works favourably for a seller because it means that buyers are eager and willing to go to greater lengths to seal the deal. As a result, sellers can list their homes for more money with more favourable terms and conditions.
For buyers, this type of market is not ideal. In a seller’s market, buyers need to be ready to act quickly and have the cash in hand to provide a deposit with a quick turnaround. They need to be prepared to bid for the property and negotiate aggressively to win. For inexperienced buyers, a seller’s market can be a stressful and chaotic time without the help of an experienced real estate professional.
Are There Any Cons of Selling First in a Seller’s Market?
Think of it this way, if you sell your home first, with, let’s say, a 90 day closing period, you are essentially only giving yourself 90 days to buy a home and finalize the deal, or else your family might be without a place to live in the interim. So in a seller’s market, where properties are easier to sell than they are to buy, this can be a pretty big risk.
Some people might be very risk-averse and not want to deal with this type of stress, so they opt to buy first in a seller’s market and then sell their home afterwards. It’s a good strategy if you want to avoid some of the bigger risks involved with selling first.
However, Selling First Does Have its Benefits
So why would someone want to sell first if there’s a chance they might not find a home to buy in time? There are still lots of benefits to selling first. Some of them include:
- Selling first means you will have more cash in hand to leverage when buying your next home.
- You will also have a better idea of the type of budget you need to work with.
- If you know you want to sell first, you can always stipulate favourable terms and conditions to ensure you have enough time to find a new place.
What About Buying First?
The main drawback of selling before buying is that you might not have a place to live if you are not able to find a new home in time. In these cases, you might feel forced to choose a home that doesn’t quite suit your specific needs. You might end up settling and then having to start the process all over again in a few years. Alternatively, you might have to go into a short term rental until you find the perfect home.
So, some of the main pros of buying first include:
- You can take your time in finding a new home because you aren’t dealing with tight deadlines.
- When you decide to finally sell your home, you can stipulate terms and conditions that are favourable to you based on the terms of your own purchase.
But there are some cons too:
- Selling first gives you a monetary boost that can help determine the budget for your new home purchase. You may need that money in hand to facilitate your next purchase.
- What if your home doesn’t sell? Or if the market changes in the time between buying and selling?
It Happened in 2017
If you buy first and then the market starts to slow down, you may end up selling your home for less money than you initially hoped for. In 2017, this happened to a lot of people who bought homes at the peak of the market in April, but then when they tried to sell in May, the market had completely changed.
If you’re planning to buy first, it’s critical that you have your current home ready to sell right away. That way, you are planning to buy and sell in the same market. It will help minimize some of the risks involved with buying first.
Although we don’t have a magic crystal ball to consult about these things, real estate professionals can help you see if the prices are starting to trend in one particular direction, and show you how to maximize your benefit in each case. For example, if prices are starting to trend upwards, you might be better off buying first so you can take advantage of lower buying prices and higher selling prices. However, if the prices are trending downward, a better strategy might be selling first at a higher price, then buying at the lower price.
Other Things to Think About
When deciding on the best strategy for you, when it comes to buying or selling first, one other factor you should consider is the type of home you are selling and the type of home you are looking to buy.
For example, if your current home is very desirable with a great location, stunning features, and in a price bracket that typically sells very well, you can probably buy first, knowing your home probably won’t have much issue selling.
However, if your home really unique or in a traditionally tougher price bracket, you should probably sell first, so that you aren’t in a situation where you are carrying two homes and have to firesale your current home before closing on the new property.
The same logic applies to buying, if you are looking for a very unique property with specific details that don’t often come up for sale, you should probably buy first since you will most likely be looking for longer.
So, Which is Better? Is it Better to Buy First or Sell First?
The truth is that it is entirely up to you. Before making the decision to sell or buy, it’s important to understand current market conditions and what your specific goals and concerns are. Your trusted real estate professional can help provide you with insight and guidance, but it’s all about determining the risks you’re comfortable taking.
What we can tell you, however, is that if you are planning to sell your home in the next few months, you need to start planning now. We’re offering a complimentary newsletter series to show you how to start planning your home sale right now.
