Planning to move? Buy first or sell first?

Any homeowner looking to sell and buy another home has to answer a lot of questions.  Some factors to consider are location, timing and budget; and some are even as simple as should you buy first or sell your home first.

These questions can be answered with a critical and honest look at the facts and figures.

There are two key factors that play into this decision, your personal risk tolerance, finances and the local housing market. 

 

Selling first – The tradition has changed

Traditionally, the recommendation has been to sell first, then find a new place.  Doing things in this order allows you to answer the critical and financial questions with more certainty.  You’ll know how much money you have and what you can afford to buy.  And, it makes it much easier to put in a clean, firm offer on a new home.

However, the housing market has changed, especially in Canada’s large urban centres where it tends to favour sellers.  With high demand, multiple offers and homes that routinely sell for well above the asking price, sometimes buyers find themselves looking for a home longer than they anticipated.  This can lead to time pressures as the closing date for the existing home approaches or you may need to rent or make other arrangements until you find your next home. 

Ways around this include extending the closing date on the existing home for as long as possible or renting until a suitable new property is purchased.  

Buy first

Those who opt to buy first, and then sell, need to have a very clear picture of their finances, as, it is possible that you run the risk of paying the mortgage of two homes at a time. The financial pressure to sell the old home could mean taking a lower price which could, in turn, change the affordability of the new home.

Bridge financing can be a solution, but you need to have a committed purchaser for the existing property.  It is also possible to make the agreement to buy the new home conditional on the timely sale of the old property but, again, in a competitive market an offer without conditions will likely win, even if the amount is a little lower.

No right or wrong answer

It comes down to what you are comfortable with.  Consultation with a realtor will give insights into local market conditions and whether they appear to be favouring buyers or sellers.  An examination of your finances with a mortgage professional will give a clearer picture of how to manage your budget and plan for potential rental costs of bridge financing.