OK, your life situation has evolved and you have to sell your home. And you have to buy a new home. You might remember the time you first bought your place and might be worried about putting yourself through the stressful experience yet again.
But wait! We’re here to lend a helping hand. If you’ve decided that you are going to buy and sell a house around the same time, then we have some tips from experts in the industry, and some tips and tricks that would help you make the journey easier for you.
So, buckle up, and read on!
Where to Start? Buying or Selling?
Doing either one of the jobs of buying or selling a property can be exhausting, and you may be scared to be handling both at the same time. How do you go about it? Do you buy a home first? Or do you close the deal on selling your home first? Well, let us start with a list of pros and cons of doing each of these. Then you’ll get an idea of what you are up for.
Buying Before Selling
Buying a house before selling it gives you the advantage of having a clear head while looking around. That’s because you’re not rushed into buying one, and you can therefore make a better choice. You’ll be free to look around at your ease, without the stress of having to move. The best part is, you could time the buying and selling of property, so that you buy when the market suits for buying, whilst you sell when it is good for selling. In some ways, buying a new home before selling your current one is better when it comes to reducing stress. On the other hand, when you close the deal on your new home, you would have to sell your house fast because…
If you buy before selling, there is the problem that if you buy a home that you get a great deal on, and you wait for the current place to sell, you will be paying two mortgages at the same time. This problem will not occur if your mortgage is paid off, but if it is not, you would certainly struggle with paying two mortgages at the same time. In addition to this, you would get a harder time qualifying for a new mortgage since you will have a higher debt to income ratio. How does this work?
“To buy before you sell, your income will have to support both mortgage payments at the same time. If you’re struggling just to have enough income to qualify for the new loan without figuring in your old mortgage, you probably won’t be able to qualify with both unless you can find a lender that will allow a higher debt to income ratio.”
Selling Before Buying
When you sell your property first, you have the advantage of knowing how much money you’ve got to work with. So, you can budget your expenses from there, and make a calculated choice in buying a new home. This way, even if you make the mistake of overestimating the value of your home, you can deal with it as you haven’t committed your money on a new house.
Another benefit of selling first is that you get the mortgage more easily, since you’re not tied down to paying the mortgage for the old home. However, you will also be left without a home for the time that you have not bought a new house. Which brings us to…
When you sell before you buy a property, you take a risk of being homeless for a while. You can’t expect to sell and the deal to settle when you predict it to. The process of selling a home could take longer than you think. Consequently, what do you do in the meantime? You could rent!
For some people, renting could be a worse option as first they would have to shift all their belongings into the rented home. Then they’d have to shift all over again when they find their new home. Since moving houses is a stressful job, the thought of moving twice in the same year would put a lot of people off. Also, selling first means that, you have to make the choice of buying a home quicker. This is because your hard-earned money would be going towards paying the rent every month. Maybe the choice you make would be a spur-of-the moment one: triggered by the anxiety to buy quickly. So, you may not get a better deal than if you’d bought first after all.
Which is Better for Me? Buying First or Selling First?
Now that we have considered some pros and cons of each, here’s the real question. Which option is better for you? Understand that both these options can have their own issues. You need to be prepared for each of them, whichever you choose.
Who Should Buy First?
If you’ve already paid off your mortgage of the home you’ll sell, or can afford to pay off two mortgages, then buying before selling might be the better option for you. It gives you the freedom to choose a house at your leisure. There’s no deadline hanging over you, and you can have a look at many houses before you find your dream home.
For people who’ve already chosen a new home, and now have to sell, they may need to close the deal on the new home before anyone else grabs it. They would also need to multitask, setting up their house on sale. In order to make it easier for them, they can simply use a real estate agent to help them out in this trouble. The agent will advise how to sell your house quickly, and you can focus on getting the deal closed on the new house. Your agent can even help with the purchase if you go to them before you start looking.
Who Should Sell First?
People who would rather NOT pay two mortgages at once should consider selling their home first before buying a new one. Of course, this means that they’d have to spend money on renting whilst they look around to buy, but it could be worth the hassle. You’d get the mortgage for your new home more easily, as you wouldn’t have the extra mortgage to pay every month.
You should keep in mind that you would have to rent. So it’s prudent that you find a rental for your family or yourself while your sale is going through. Do remember, though. that rental markets can be tight at times so you shouldn’t hang around. It might take four weeks to find and rent a place.
Things to Keep in Mind
Buy first or sell first, you need to keep some things in mind so that you don’t fall into trouble later.
Be Ready with a Contingency Plan
If you choose to buy a home before you sell, you need to have a plan for the financials to take care of the mortgage. Make sure you have a plan ready for when things don’t go as planned.
Talk to a mortgage broker and do your sums. Ask them about your financing options such as temporarily changing to an Interest Only Mortgage or what the cost of a Bridging Loan might be. This is a whole other area outside the scope of this article, and you should discuss it with a trained professional broker.
Do Your Research Properly
You should research on the state of the market in your area. A lot of things depend on whether the market is currently favouring the buyers or the sellers. Once you are aware of the situation, you can make a better plan to optimise your role as a buyer and a seller. An experienced real estate agent can really give you their insights into the state of the market.
Strategies for a Buyer’s Market
When the market favours the buyer, you should definitely consider selling first, and buying later. This is because you should get the harder part over and done with, which, in this case, would be selling.
In a buyer’s market, selling would be difficult, so, if you buy a house first (which you will get fairly quickly), then you’d be left with two mortgages to pay. And since it is the buyer’s market, you would face some problems and delays in selling. That means you’d be stuck paying for two mortgages for a long time.
Here are some helpful tips, for you to think about.
1. Check out the Competition
Do some research and check out prices around your neighbourhood and, especially, for property like yours. The price you’d like for your house should be justified by asking, “What else could a buyer get for their money?”
2. First Impression is the Last Impression
The street appeal of your house matters. A lot. You need to ensure that the buyer is attracted to your property and you get them inside to inspect. Consider a makeover and create a great first impression to buyers.
3. Price Realistically
Putting a realistic price is the most important part while selling in a buyer’s market. You can discuss this with an agent to make sure the price is attractive to buyers.
Strategies for a Seller’s Market
When the market favours the seller, you should buy a home first, and sell later. Again, the reason is the same as before. You need to get the hard part over with as soon as possible. Since you know that the market will favour you when you sell your house, it is best that you buy a house quickly, and then sell the house. This way, you will be safe. After you sell your house for a good price, you won’t have to worry about buying a house in a seller’s market, as you would have already done that.
However, you still need to get your ducks in a row and be ready to sell your place as soon as you have found a new one. Prepare your place for sale, get the street appeal right, remember the buyer’s first impressions. Get the agent in to give you an appraisal so you have a proper idea of what you can spend and so you can get market ready.
If you are wondering how to buy in a seller’s market, then here are some strategies to help you out.
1. Be Prepared
In a seller’s market, there are more people after the same property, so you must be ready to act quickly and to have the money at hand. You’ll need to convince the seller of the house that you choose that you are the individual that has the finance to be able to pay them. You should let the mortgage broker contact the real estate agent to confirm that the mortgage has been pre-approved. This will further improve your credibility in the eyes of the seller. Remember, there are many buyers in the market, so you need everything in your favour that will make you stand out from the crowd.
2. Research Online Before Inspecting
In order to make the choice simple and easier, you should browse houses online and make a shortlist. Make a specific list, and make sure that the list only includes the properties that you would be interested in buying. Then inspect the properties with the intention of buying. Don’t confuse yourself by looking at places that don’t meet your needs.
3. Keep in Contact with Your Agent
Your agent is your friend in need. You need to keep in contact with them so that they can provide you information about any and every new house that is on the market, which meets your specifications of a dream house.
Line Up Your Settlement Dates
In order to manage both selling and buying, you need to coordinate the settlement dates closer to each other.
If you are buying first, you should try to negotiate a longer settlement so that you have more time to sell and settle that contract. This might be tricky as the seller is in the position of strength. When you negotiate the sale of your old house you can ask for a settlement date that lines up with that of the place you are buying.
If you are selling first, try for a longer contract period on your old property and then negotiate a shorter settlement on the home that you are buying.
Talk to Your Agent
Keep in constant contact with your agent. Your trusty agent knows about the state of the market. They’ve experienced it before and can guide you through the difficulties of buying and selling at the same time. We have mentioned many things that you should keep in mind, such as the state of the market, whether you have paid off the mortgage of your home or not, and other things. Your agent would know this and keep all these considerations in mind, and many more that you might not have thought of. They’ll help you make the best choice with what you have, for both selling, as well as buying a house.
As you are buying and selling around the same time, you have double the pressure. To ease that, you would need the help of a professional who knows their way around the market. One who can point you to the right direction, so that you don’t wander off where things will be costly for you and waste your time and energy.