Should you Sell Before you Buy or Buy Before you Sell?
A question often asked and discussed, to sell before you buy or buy before you sell?
The process for most of us would be to sell before you buy because this is less of a financial risk. You will know how much you have sold for and know what your budget is for your next purchase based on the result you have achieved.
During Covid19, the lockdown effects on the property market in Victoria and NSW, has created a significant change in the way people are viewing their choices. In a market with little stock, some areas are seeing house prices increase due to competition beyond comprehension.
The uncertainty of lockdowns and the speed at which they have been enforced has seen many families thrown into a situation of selling their homes to find themselves locked out of the property market. With no options to inspect properties to buy, this situation has left many buyers in a scramble to find somewhere to live.
It has caused a ripple effect and a wave of uncertainty which has led to many more people considering buying before selling.
If you are in a financial position to buy a home before you sell and/or, you find your dream home before you have sold, the option to buy first could work in your favour.
To help you understand what would be right for you, I have listed some advantages and disadvantages for both options below.
Selling a property before you buy
Advantages:
If you decide to sell first, you will put yourself in a position of knowing exactly how much you can spend on your next home. Make sure you factor in the costs that will be taken out of the sales proceeds at settlement. Your solicitor or conveyancer will be able to provide a close estimate of this for you.
You will not feel pressured into selling because you ‘have to’. This will help to have a strategy to negotiate a higher sale price.
You can negotiate a longer settlement term to allow you time to search and find your next home purchase.
If demand is flat or declining, you may be able to time the market to your advantage.
Disadvantages:
If you decide to sell first, you may feel pressured into buying your next home because of the stress of not having anywhere before your settlement.
If demand is high and increasing, you may find yourself buying under competitive market conditions and needing to pay more than expected.
Buying a property before you sell
Advantages:
If you decide to buy first, you can take the time needed to find the right home that will suit your needs at a price you are prepared to pay.
If you are confident your existing property will attract a high level of competition you may choose to sell at auction, so you have a set sale date and an opportunity to sell unconditionally.
Negotiating a longer settlement on your purchase can allow you the time needed to line settlement dates up
If demand is high and increasing, you may be able to sell your property at a later date when prices increase.
Disadvantages:
If you decide to buy first, you will put pressure on yourself to sell your home in a specific timeframe and accept the price buyers offer.
If the settlements do not line up, you may need to arrange approval for a bridging loan which will cost extra for the time it takes
If demand is flat or declining, it may take longer for you to sell your existing property and create unwanted stress.
The decision to buy or sell first should be determined by your circumstances and the knowledge and information you have around the current market conditions. Know what risks you are prepared to take and how comfortable you are with either scenario. Options are important. Do you have a backup plan of somewhere to live if you were to sell first and not find something to buy straight away? Buying and selling in the same market is always preferred and minimises any risk of being priced out in a HOT market.
If you understand your risk profile when it comes to real estate, it will help you decide what is right for you.
The information contained in this article is intended to be of a general nature only. It has been prepared without considering any person’s objectives, financial situation or needs. Lisa recommends that you seek independent legal, financial, taxation and real estate advice before acting on any information in this article.
Book in a free strategy session with Lisa to discuss your circumstances and get the expert advice you need about the current market conditions
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