A question that comes up quite often from my clients, (especially empty-nesters who have lived in the same home for many years, raised a family and are looking to downsize), is should they buy their next home or condo first and then sell their home or should they sell first and buy second. It’s the question that every homeowner who wants to upgrade or downsize asks themselves before deciding to move, should you buy or sell first?
While there are advantages and disadvantages of either choice and much of the decision is based on your financial situation and timeline, I think you might be surprised by my advice. Find out here the definitive answer if you should buy or sell first.
Many homeowners looking to upgrade or downsize fall into this thinking when deciding if they should buy or sell first. Its understandable, many have been in their homes for many years and it’s a daunting task to give up the home they have lived in or raised their family in. They don’t want to give up their home for just any place, so their thinking is that they will put their home up for sale once they find the right place to move to.
No one wants to have to choose just ANY home because they’ve sold and now HAVE to move, or worse end up homeless because they’ve sold and have no home to move to.
No one wants to have to choose just ANY home because they’ve sold and now HAVE to move, or worse end up homeless because they’ve sold and have no home to move to. While ideal in principle it is not usually the best way to go about it, let me tell you why.
If you have the financial means to buy another home or condo while maintaining your current home, this is ideal, you can purchase the new home or condo, then list your home for sale. Its comforting to know where you are moving and you have the luxury of being able to move on your schedule, and gives you time to renovate if needed before moving out of your home.
But what if your home takes 6 months or longer to sell? Can you hold both properties? Will the bank finance your purchase if you still have a mortgage on your existing home? Can you afford the payments on two properties? Is a high interest bridge loan an option? All important questions to ask when discussing with your real estate broker.
When weighting the decision to if you should buy or sell first there are a number of things to think about. If you can’t hold both properties for a potentially 6 month period, and you still want to buy first then sell, most buyers will opt for a conditional offer. What this means is that when you find the ideal purchase, your offer will me made conditional to you selling your existing home within a set deadline.
Most conditional offers however will allow the seller to continue to offer their property for sale to other buyers while they wait for you to sell your home. If another buyer comes along the seller can accept their offer and once all their conditions are removed, they will notify you that you will have 72 hrs to decide to purchase anyways (and hold both properties) or walk away and lose the house.
It’s a disappointing situation for many buyers who’ve found their dream home or condo but end up losing it because they did not put their home for sale first. Another factor that plays against you is that most listings priced well with great features and locations will sell quickly and be gone before you sell your home.
There are a number of real advantages to selling first and buying second. First of all, you have the luxury of waiting to sell for the right price instead of having to jump at any offer in the conditional offer situation where you don’t want to lose the home or condo you want to buy.
Walking in with a solid offer that’s not conditional can help your broker get you the home or condo for a better price than the buyer who still has to sell their own home
On the purchase side, when you write up an offer with your broker you won’t have the condition of selling your home there. Walking in with a solid offer that’s not conditional can help your broker get you the home or condo for a better price than the buyer who still has to sell their own home.
The level of disappointment is also reduced as you are able to buy right away without having to wait to sell your home and risk losing the one you want to buy to another buyer. In the end you will typically be able to sell for more and buy for less when you sell first and buy second.
Finally the big concern a lot of longtime homeowners have is that they will sell their home and there will be no place for them to go, or they won’t find a place to buy in time and will be out on the street. What I usually will recommend is to put a very long closing on the sale of their home, so that they have 3-4 months from the time their home has an accepted offer on it to the time they have to move out. This way there is time to shop around and find the right property to move to. The other option is to sign right away at the notary and pay rent to the new owners for the months you will be there actively looking for a new home or condo.
So when deciding if you should buy or sell first, weigh your options. If you can afford to hold both homes including any potential bridge loans, two mortgages and holding costs, it may be advisable to buy first and sell second. If you’re like most homeowners the answer is to sell first and buy second, you’ll save money, heartache and likely get a better deal on your next home and sell your current home for more.
If you are a longtime homeowner and have thought about downsizing or upgrading, there are many options available to you to ensure your move takes place without any hassle and that you have the time needed to find a great place to buy. I invite you to contact me for a no obligation consultation to discuss your situation.
An earlier version of this article I wrote appeared in the Montreal Times newspaper.
I'm Andrew Mitchell, Chartered Real Estate Broker and Owner of Vistacor Realty Group. I help buyers, sellers and investors in the West Island, Montreal and Vaudreuil-Soulanges areas buy and sell homes. My goal is to provide you with useful, straight-forward insights and relevant real estate market updates. Contact me with any questions. Follow me on twitter here.