It’s generally advisable – and less risky – to sell before buying another property

ANYONE who has ever bought or sold a property knows it takes time – at the moment correctly priced properties spend an average of three to five months on the market – according to a recent Lightstone Property Residential Mortgage Market Overview.

Once sold it takes about another three months for the transfer to go through.

So, should you sell your property before buying another, or buy the next one first, before selling the current one?

“It’s the eternal question”, says Bruce Swain, managing director of Leapfrog Property Group.

“Both options have advantages and risks, but all things considered I would generally advise selling before buying another home.”

Swain believes the risks of selling before buying another property are more manageable and the advantages are more beneficial.

“Essentially there are two risks when selling your property first: you might not be able to buy the right property as quickly as you’d hoped and while you wait you may need to rent, which is an added cost. Second, you might find that prices have gone up in the meantime and you now can’t buy into a higher or even similar price bracket.”

He says these risks can be avoided by carefully managing the sale of a current property – it’s possible to extend the settlement date of a property to have enough of a time buffer to select and buy a new property.

He says the advantages of selling first include that it puts you in a stronger position when buying as you will have the funds available. This is increasingly attractive to buyers and mortgage lenders as the uncertainty around the local economy increases more and more banks are asking for larger deposits.

Because you don’t need to make a quick sale so as not to pay two mortgages, for example, you won’t be pressured into selling cheaply. Having time also puts you into the stronger negotiation position.

You will know how much you can spend on a new property and won’t be dependent on getting the right sales price to fund the property you are in the process of buying.

If prices are falling, then houses become more affordable as you wait.

“Although no strategy is foolproof, there are a number of things you can do to ensure you don’t end up having to rent while the transfer of the new property goes through, or lose out as the property prices start going up and you can’t afford a similar property,” says Swain.

“Do proper research – it’s imperative to know what the current property is worth and, based on where you want to move to, what’s available in the chosen area in that price bracket.

“Get pre-approval for a new home loan – this can save valuable time.

“Slow down the selling process by agreeing to a longer period between agreeing to an offer and completing the transfer process as this allows valuable time to find a property and for that transfer to be completed,” says Swain.