Should you first buy or sell when moving?
In the current hot market, is it better to buy my next house before putting my current one up for sale? I expect my house will sell quickly and I don’t want to be homeless. The question of whether to buy or sell first is one that every homebuyer and seller should consider before entering the real-estate market. There really is no right or wrong answer; there are pros and cons to each approach.
In a seller’s market, which is the case in many parts of Ontario, there is a shortage of homes for sale, so buying first may be more prudent, particularly if you have specific requirements for the new home. In a buyer’s market, you might want to sell first.
Still, there are risks with either approach and you should discuss this strategy with your real-estate professional before you make a decision.
If you decide to buy first, you may find it less stressful because you are not under pressure to purchase before a closing date on the sale of your existing home. So, that means you can take more time to find the right home for you.
However, if you are not careful, you could end up owning two homes for a period of time. This could happen if you buy a new home and can’t sell your existing home right away, or if the two transactions don’t have the same closing date. This is less of a risk in a seller’s market, where there is a shortage of inventory, but it is a risk just the same.
You can protect yourself by submitting an offer that is conditional on the sale of your current home, but this could be less attractive to the seller and you may lose out to another buyer who makes an offer without that condition.
You should also get advice from your sales representative about what you can do to help you sell quickly.
This could include making upgrades to systems such as heating, putting a fresh coat of paint on the garage door or removing clutter from your living spaces to make the home look more spacious. The cost-benefit of any investment and how much you want to spend will be factors to consider.
If you decide to sell first, you won’t run the risk of owning two homes at once.
And once you sell your home, you will know how much money you have to put toward your new purchase.
However, once you sell, you will now be staring at a firm deadline for having to move out of your sold home. That adds pressure when you are looking for a new home. If you start running out of time, you could end up settling for a home that is not exactly ideal, or one that is costing you more than you wanted to pay.
It would be wise to have a contingency plan in place for either scenario.
If you decide to sell first, then look into the availability of short-term rentals or ask to stay with friends in the event there is a gap between leaving your old home and moving into your new one.
If you decide to buy first, investigate whether you qualify for bridge financing to help cover the down payment and other costs until your current home is sold, in case you have to take possession of the new home before you sell.
In fact, some professionals recommend staggered closings — take possession a few days ahead of closing on your sale — to help alleviate the stress of everything happening on the same day. Speak to your real estate professional to help decide what’s best for you.
Regardless of which route you decide to go, talk to your registered real estate professional and fully understand the risks associated with each scenario before you make any decision. It could save you a lot of angst and money down the road. Joseph Richer is registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real-estate professionals in Ontario. Email questions to askjoe@reco.on.ca. Find more tips at reco.on.ca, follow on Twitter: @RECOhelps or on YouTube at youtube.com/RECOhelps.