[Updated November 21, 2023]
Real estate can be complex, especially in a fast-moving market like we have seen over the last few years. One of the most common questions that we hear from our clients is, “Should I buy or sell first?”
With so many moving pieces to be aware of, there are no easy answers. Both options come with advantages and disadvantages. A little background research will help you make the right decision based on the current market and your personal situation.
How Much Is Your Home Worth?
The first step, whether buying or selling, is to have a clear idea of how much your existing home is worth in the current market. When you know how much you are likely to earn, you can move forward with more confidence.
The value of your property depends on several factors, including the square footage, number of bedrooms and bathrooms, condition, any recent updates, and the location. You must also consider how much similar properties in your area are listed for, and what they end up selling for.
It can be challenging to place a dollar value on your house. Fortunately, many real estate agents offer home evaluations that provide you with an objective, fact-based estimate.
Owning a home is a great way to build your equity and provide economic stability. Learn more in the posts below:
- What’s the Fastest Path From Broke Student to Homeowner?
- Can You Buy or Sell a Home Using an App?
- From Buyers to Sellers: The Intricate Dance of Inflation, Interest Rates, and Real Estate
What Is the Market Doing?
Because the real estate market often moves quickly, the value of your home can fluctuate. When there is a lot of sales activity and many listings receive multiple offers, you can usually expect to earn more once your transaction closes. If the market is slow, you may earn less.
However, everything is relative. If you earn more when you are selling, chances are the house you want to buy next will also cost more. If your house sells for less, then your next home will likely cost less as well. All the same, knowing the value of your property will help you make more informed decisions.
The Risks of Buying First
What happens when you come across a listing that you fall in love with at first sight and feel like you must have? You don’t want to risk losing the property, so you place an offer. This can be one of the most empowered moments of your life. However, there are also two significant risks you should be aware of.
- Your existing home may take longer to sell than you anticipated. If this happens, you may end up carrying the cost of two properties for the time being.
- You may not earn as much from your sale as you hoped. This could put a strain on your budget if you are counting on those funds to comfortably afford your new home.
Both of these risks can be minimized with a conditional offer. However, this may not always be feasible in a fast-moving seller’s market where you face competition from other buyers. If you decide to buy first, it is critical to be conservative about your expectations, both in how much your home will earn and how long it will take to sell.
The Advantages of Buying First
Buying first can be risky unless you have the financial resources to cover both properties if the need arises. For the right buyer, it also offers several advantages, especially in a competitive market.
- It allows you to act quickly if you find a unique listing that you love. You don’t have to worry about losing your dream home to another buyer while you wait for yours to sell.
- Since you’re not up against the deadline of your closing date, you won’t feel rushed or pressured into buying just “any” house. Instead, you can take your time to find the right home.
- You don’t have to worry about getting priced out of the market if housing values are rising quickly. You may even grow your equity by holding two properties for a short time.
- The moving process will be less stressful, especially if you take possession before your existing property sells. You can move in increments at your own pace instead of all at once.
Before buying first, it’s a good idea to talk to your mortgage advisor to see what you qualify for in a new home. Getting pre-approved allows you to place offers in confidence, and you can safely drop the condition of financing.
The value of your existing home will also play a role in how much you are pre-approved for. You can schedule your free evaluation right here.
The Challenges of Selling First
Conventional wisdom is that selling first is usually the safer option. However, every situation is different, and there is no “one size fits all” scenario. Though selling first provides more security and peace of mind in some aspects, there can also be a few disadvantages.
The process of finding a new house will be more rushed as your closing day arrives.
In an extremely fast-paced seller’s market, housing values can rise after your sale closes and before you purchase a new one. Once again, you will want to act quickly so you don’t get priced out of the market.
If you are unable to find a suitable house on time, you may have to find temporary accommodations. Not only does this make your transition more expensive, but it could mean having to do a double move.
The Benefits of Selling First
Though not perfect, selling first has become the traditional path for a reason. Unless you have access to vast financial resources, it is the safest option. With the funds from your sale securely in your bank account, you can proceed with greater peace of mind.
You know exactly how much you have earned from your sale, which means you can set a comfortable budget for your next home.
You don’t have to worry about committing to a purchase only to find your existing home doesn’t sell at all, or for much less than you thought.
You will have more negotiating power when the right listing comes up. You can safely drop both the condition of financing and the condition of sale, which makes sellers more likely to choose your offer in competitive situations.
Regardless of whether you buy first or sell first, getting the best possible results from your sale is critical. The resources below will help:
- Tough Questions to Ask Your Realtor® When Selling Your House
- Home Inspections: Friend or Foe When Selling Your Home?
- 5 Quick Updates That Add Resale Value
It’s Always Personal
Knowing the risks and advantages of either scenario is critical. However, your decision isn’t always going to come down to an endless list of “what ifs.”
In real estate, everything is always personal, and no one knows your resources, goals, and risk tolerance better than you. That said, here are some final considerations when deciding whether to buy or sell first:
- What is your financial situation? If you can easily afford to carry both homes for the foreseeable future, buying first isn’t nearly as risky. On the other hand, the last thing you want is to commit to a purchase and end up earning less from your sale because you must move quickly.
- How unique is the property that you want to buy? If a rare and particularly desirable listing comes up, you might want to buy first. If there are tons of them on the market, then you have the luxury of selling first.
- How fast are similar homes in your price range & neighbourhood selling? If you have a “hot property” that is going to sell within a few days, then you might feel comfortable buying first. If you have a house that may take a little more time, then you are probably safer to sell first.
Do you have more questions about either buying or selling a house in Guelph or the Tri-Cities? We are standing by to help with anything you need. Reach out today to info@gowylde.ca or call 519-826-7109 for more information.
