Buy or Sell First - The Pros and Cons

Buy or Sell First - The Pros and Cons

Moving to a new home means you’re going to have to do something about your old one.

Deciding on the best course of action can be challenging. Should you sell your property before moving, or is it wiser to secure a new home while still residing in your current one? This is the age-old question that often requires careful consideration of the advantages and disadvantages associated with each option. 

Take the time to evaluate these factors to make an informed decision that aligns with your specific needs and circumstances.

To Buy or Sell - Your Options

The best place to start when weighing up your options on buying or selling your home first is to look at the current market. Is it currently a buyer's market or a seller's market? 

If it is a buyer's market

In a buyers market, there are more houses for sale but fewer buyers around. In this situation where supply outdoes demand for houses in the market, the result is usually lower home prices and a longer duration to sell. 

In this case, it may take a longer time to find a buyer and a price you’re happy with. For this reason, it may be wise to sell your existing home first to give you a better understanding of your cash flow and financing before you buy your next house. 

If it is a seller's market

In a sellers market, there are fewer homes for sale but plenty of buyers looking to purchase. In this scenario, competition between buyers is higher, which can drive up demand and prices. 

In this case, it may be wise to buy first knowing that there’s a fairly good chance your existing property will sell quickly for a price you’re happy with. 

Factor in your finances

Even more important than the current market conditions is your financial situation. 

Before deciding whether to buy or sell your home first, you need to understand how much or how little financial wiggle room you have.  

If you require a little more certainty and better insight into your purchasing power, then selling your home before buying a new one is likely a better option. You’ll have a much better idea of how much money you’ll have available for your next home, and likely to have more at your disposal for when it’s time to purchase.

If you are fortunate enough to have a regular income and enough equity in your existing home, you may not have to sell your house before buying. 

Of course, prior to making any big decision, it’s recommended to talk to an expert. You can get advice from your local real estate agent who has solid knowledge about the current market and your local real estate trends. 

Buying a House Before Selling - Pros

  • Peace of Mind: You will have a home already secured so you won’t stress if your old home sells quickly. This preemptive measure ensures that you won't find yourself in a situation where your old home sells rapidly, leaving you in a potential housing gap.

  • Utilising Equity for Deposit: May have the ability to use the equity in your current loan as a deposit for your new home. This strategy allows you to capitalise on the investment you've made in your existing property, potentially offering more options and flexibility when securing financing for your new home.

  • Strategic Negotiation: Being in a position to buy before selling may give you a strategic advantage in negotiations. Sellers may perceive your offer as more attractive, knowing that you are not contingent on the sale of another property. 

  • Luxury of Time: You can spend as much time as you like shopping around for a new home for sale. You can take your time exploring various properties on the market, attending open houses, and thoroughly evaluating different neighborhoods. This approach enhances your ability to make a more well-informed decision, ensuring your new home aligns with your wants and needs.

  • Easier Transition Period: Buying before selling allows for a smoother transition, especially if you have school-aged children. It minimises disruptions to educational commitments and social connections, ensuring a more seamless integration into the new neighbourhood.

Buying a House Before Selling - Cons

  • Bridging Finance Constraints: You might have to organise bridging finance between the two properties, giving you a time limit. This might limit the time you have to sell your old home.

  • Financial Gap Challenges: If your old home sells at a less-than-desirable price, you may have to fund the difference in costs. Funding the difference in costs between the expected and actual selling prices can pose a challenge, affecting your overall financial planning and potentially leading to unexpected expenses.

  • Pressure to Accept Lower Offers: You might feel pressured by time and accept a lower offer, resulting in settling for a sale price that doesn't reflect the true value of your property.

  • Double Mortgage Repayments: During the transitional period, you may find yourself responsible for double mortgage payments – paying for both the new and old properties simultaneously. This financial commitment can put a significant strain your budget.

  • Market Variability Risks: Buying before selling exposes you to market fluctuations, and there is the risk that property values may not align favourably during the selling phase, potentially affecting your financial outcomes.

Selling a House Before Buying - Pros

  • Clear Idea of Your Finances: The proceeds from the sale of your home can be used on your new one. The proceeds from the sale contribute to your budget for the next property, giving you a precise understanding of your available funds.

  • Streamlined Budgeting: You will know exactly how much you can spend on your next purchase. You can create a detailed budget, considering not only the property's purchase price but also additional expenses like closing costs, renovations, and potential furnishings.

  • Reduced Financial Strain: Selling your current home first avoids the financial strain associated with double mortgage payments. Because of this, you can better manage your financial resources and allocate them efficiently toward your new home.

Selling a House Before Buying - Cons

  • Rushed Purchase Decisions: If your home sells quickly, you could be left to make a rushed purchase of a new home so you have somewhere to live. This time pressure can limit your ability to thoroughly research and assess available options, potentially leading to a less-than-ideal purchase.

  • Market Price Fluctuations: Local property prices could rise in the time between selling and buying a new home. This market variability poses a risk that the budget you initially set based on the sale proceeds may no longer align with the current pricing landscape, potentially affecting your purchasing power.

  • Additional Renting Costs: You might have to spend more to rent accommodation between homes. These expenses can include monthly rent, security deposits, and utility bills, contributing to financial considerations during the interim period.

  • Potential for Limited Choices: The urgency to secure new housing quickly may limit your choices. If the market is competitive or inventory is low, you might have to compromise on certain preferences or settle for a house that doesn’t fit your criteria. 

  • Emotional Stress: The time-sensitive nature of the transition, especially if your home sells quickly, can introduce emotional stress. The pressure to secure a new home promptly may lead to heightened anxiety and decision-making stress.

After carefully considering both options, whether to buy a house before selling or vice versa, the decision hinges on a multitude of factors. The real estate market's current conditions, your financial stability, and your personal preferences all play crucial roles in making this significant decision. 

DISCLAIMER - The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.

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