The timing conundrum - to buy first or sell first?
TIMING is the biggest conundrum homeowners face when selling one house to buy another: which should they do first?
Do they sell their home and bank on being able to find a new roof over their head before they have to move out?
Or do they buy a new home and hope their existing house sells before settlement?
Both options come with pros and cons, unique challenges and pressures, and an element of risk.
Real Estate Authority chief executive Kevin Lampen-Smith says there’s no ‘right’ way to buy and sell houses but homeowners need to think carefully about their appetite for risk.
‘‘Buying first provides the luxury of time, meaning it’s possible to hunt for homes without a settlement date looming on the horizon.
‘‘A buyer is able to consider as many houses as they like, move at their own pace and keep searching until they find the property that’s right for them and their family.’’
The downside of this strategy is having enough funds to pay the deposit on a new home if equity is tied up in the existing property.
Buying first also means suddenly there are twice the bills to pay, from home insurance, rates and utilities to absorbing the cost of bridge financing to pay two mortgages.
‘‘The extra financial strain can sometimes mean sellers pressure themselves into setting a modest listing price for their existing house or accepting a lower offer, just to seal the deal quickly,’’ LampenSmith says.
On the flip side, selling first can give homeowners a much clearer picture of their financial situation.
Once the existing home is sold, they’ll know how much cash they have and what they can afford.
‘‘However, once an offer has been accepted on the current home, the clock starts ticking towards settlement day,’’ LampenSmith says.
‘‘Some buyers then feel added pressure to make an offer on a home that doesn’t exactly fit their needs or wish list, because they’re so focused on finding a new place to move into.’’
One solution is to negotiate a long settlement period on the existing home, to allow enough time to find a new property.
If this isn’t possible, consider renting - although in a tight rental market finding short-term accommodation can be a challenge - or staying with friends or family.
Lampen-Smith says it’s also important to consider the added costs of moving household belongings twice and paying for a storage unit.
‘‘Speak to your bank or a mortgage advisor to get your finances in order and then build your support crew.
‘‘For example, you’re going to need legal advice, a licensed real estate agent to sell your property, an insurer and a building inspector.
‘‘Building a strong support crew of qualified professionals will ensure you have the advice and guidance you need at each stage of the process.’’