To buy or sell first?

ONE OF the biggest dilemmas for homeowners who want to shift is deciding which to do first: sell their house or buy another?

‘‘When it comes to selling first or buying first, there’s no right or wrong way to tackle it, but you need to think carefully about your appetite for risk,’’ Real Estate Authority chief executive Kevin Lampen-Smith says.

‘‘Both options come with pros and cons, and their own unique set of challenges and pressures.’’

Buying a house first offers several advantages.

It gives you time to hunt for homes without a settlement date looming, and lets you to consider as many houses as you like and at your own pace.

However, while time might be on your side, your finances might not be, LampenSmith says.

‘‘To secure the new home, you’ll need to come up with the money for a deposit, which might be tricky if your equity is tied up in your existing property.’’

Buying first means you may suddenly have double the bills to pay, including home insurance, rates and utility bills, as well as absorbing the cost of bridging finance to pay two mortgages.

Lampen-Smith says the extra financial strain can pressure sellers into setting a modest listing price for their existing house or accepting a lower offer, just to seal the deal quickly.

Selling first will crystallise your financial position: you’ll know how much you afford to spend on buying a new home.

However, once you’ve accepted a buyer’s offer, the clock starts ticking towards settlement day.

As time runs out, you may feel pressured to make an offer on a home that falls short of fitting your needs or wish list.

To avoid this, ask your real estate agent to negotiate a long settlement period on your own house.

But this won’t always possible, so consider a Plan B.

In a tight rental market, it can be very challenging to find short-term accommodation, especially when you aren’t sure how long you’ll need to live there. Do you have family or friends you could stay with?

You’ll also need to consider the added costs of moving your belongings twice and paying for storage while you’re between properties.

‘‘There are pros and cons to both approaches but making sure you have everything in order, such as your finances, before you start down this road will help ease the stress,’’ Lampen-Smith says.

He recommends discussing your circumstances with a bank or a mortgage advisor, lawyer, real estate agent, insurer and building inspector.

‘‘Since your home is likely to be your biggest asset, it’s important to prepare for some hiccups along the way and have time or extra money set aside to deal with these.

‘‘Building a strong support crew of qualified professionals will make sure you have the advice and guidance you need at each stage of the process.’’

For independent guidance and information on buying or selling, check out www.settled.govt.nz.

● Photo: 123rf.