SHOULD I BUY FIRST OR SELL FIRST?
It depends on what you want and what you have, Dennis Faulkner writes.
In many regions in Canada there is a significant shortage of housing inventory, which is driving up prices. It is also creating uncertainty for some home sellers on whether they will be able to find a new home to move to after selling their current home.
Real estate has had a very strong start across the nation in 2021, and in Edmonton demand increased by 50 per cent in the first month of the year.
If you are planning to make a move this year, your sale and purchase strategy should be determined by the type of property you are selling and the type of property you are buying.
To determine the right strategy to use, you must first understand the market well. Let's take a look at how different property types are selling in this region.
We have seen single-family homes under $500,000 in the market shift toward a seller's market where we are witnessing more multiple offers. Homes above the $500,000 range, however, are still in a buyer's market for the most part.
While demand is still strong for homes in Edmonton's core, there may be a slight trend upward in demand for larger and more modern homes in the suburbs as more employees are now able to work from home indefinitely.
Sherwood Park and St. Albert might end up being our hottest markets this year. Buyers may have some challenges purchasing a property without finding themselves in multiple offers. These two regions have among the highest demand, relative to supply.
Condos are still in a buyer's market, but we are seeing bargain-priced condos selling more.
We are anticipating more demand for acreage and rural property this year.
Buyers looking to purchase a single-family home under $500,000 may have some challenges with selection. Of course, more properties will be listed as we move into spring, but it's anyone's guess as to whether demand will outpace supply this year.
Buyers of single-family homes under $500,000 who are downsizing from a larger home or upsizing from a condo may want to tie their purchase to their sale or have a backup plan.
Your backup plan may include a temporary rental if you cannot find the home you desire. Ideally, you don't want to settle on a major purchase. The downside is that no one likes to move twice, and there may be some uncertainty about prices going up while you wait for your new home to come on the market.
Your other option may be to tie your purchase to your sale. You simply make it a condition of your purchase that you first sell your existing home before removing conditions on your purchase.
While this strategy can be effective, it can also have challenges. In a hot market, many sellers will not agree to a seller's sale-of-home condition. And if they do, it will likely have what is commonly referred to as a “48hour” clause. This clause basically says that should another buyer make an acceptable offer on the home you are buying, you will have only 48 hours to remove your sale-of-home condition to proceed with your purchase.
A third option — which is my favourite option where it is possible — is to not sell at all. This strategy can offer the most flexibility, a move with less stress and a wealthier future. I see real estate not just as a place to call home but also as an investment vehicle, as a way to create a nest egg for retirement.
If your situation is that you are planning on downsizing into a condo this year or upsizing into a more expensive single-family home above $600,000, then the real estate gods may work in your favour for a couple of reasons. First, there is still ample selection of condos and single-family homes above $600,000, so you should be able to find something that you really like and that is also a really good fit.
Second, condos have dropped in relative value compared to single-family homes. If you purchased a condo in 2007 for $400,000, it may be worth only $260,000 today. If you purchased a single-family home in 2007 for $400,000, it should be worth about $400,000 today.
With this change in relative value, you can benefit by having more money left over after your move.
I believe it's a great time to upsize to a larger home as well. A home that sold for $800,000 in 2015 may sell for $750,000 today. And the selection is still quite good at this price point.
This year, in particular, it will be especially important to work with a knowledgeable, trusted and experienced realtor to help you formulate an effective strategy that is specific to your needs, goals and the current market conditions.
A little planning, research and a good adviser can help to ensure that your move this year is your best move ever.