One of the most common questions we hear from homeowners who are interested to move is “should we sell first or buy first?”
There is no perfect solution, so you have to choose a strategy that works best for your personal circumstances and comfort level.
If you sell first, you run the risk of not finding something to buy and having to rent for a while. If you buy first, you run the risk of not being able to sell your property quickly and getting stuck with two real estate properties for a while. Some people say they could not handle the stress of being out the market, and others say they could not handle the stress of owning two homes at the same time – it really varies from person to person.
For example, we recently worked with a homeowner who sold her home first and is renting while she looks for another property to buy because she absolutely did not want to take the risk of owning two properties at the same time. On the other hand, another homeowner made the decision to buy first because he believed it was more difficult to buy than sell and he would rather chance owning two homes for a short time than find himself out of the market. It’s a very personal decision that every individual has to make for him/herself.
Another important consideration is that the market could change. Nobody has a crystal ball; in a few months the market could change from a seller’s market to a buyers’ market and vice-versa. Nevertheless, homeowners are successfully selling and buying in this market, and you can too.
A large part of the real estate market is comprised of homeowners that are either upsizing or downsizing. Our clients have used all of the following scenarios with success:
1. Sell your existing home with long completion dates so you have time to find a new home. In this scenario, you sell your home with completion and possession dates that are 60-90 days out and then search for a new home and try to line up the dates as much as possible. Of course, there is a risk that you may not find a property before completion and could end up renting for a while.
2. Buy a new home with long completion dates and then quickly sell your existing home with corresponding move-in/out dates. This is a good option if you can afford the risk of potentially holding two properties temporarily. For example, we have assisted some home owners to purchase properties with long completion dates to allow them time to sell their existing homes, but they had financing lined up just in case they had to carry both properties. Generally speaking, this works better in a sellers’ market when you have a higher probability of selling your home quickly.
3. Sell your existing home with short completion dates and rent back the same home for 3 or more months while you find a new home. By having short completion you get paid quickly and have cash on hand to help you negotiate a good deal on a new property, while in the meantime renting back in the comfort of your existing home. We have helped sellers achieve this scenario; however, some buyers will not agree to this because they are eager to move in themselves. Generally speaking, this usually works better in a sellers’ market when buyers are more willing to make concessions such as this.
4. Sell your existing home and rent somewhere temporarily while you find and buy a new home. The upside of this scenario is that you will have cash ready so you are able to jump on a good deal when you see it; however, you take the risk of not finding anything to purchase in the short term and you might get caught in a situation where prices move up while you are renting.
5. Make an offer subject to selling your property. Sellers are not keen to wait for buyers who need to sell, but if the price is right then they may consider accepting your offer with a time clause which means that if they get a second offer that is better they can give you 48-72 hours to remove subjects. This is more likely to be accepted by sellers in a buyers’ market when sellers are more willing to make concessions.
6. Use the equity in your existing home to secure financing to buy the new property and then immediately put your existing property on the market. This works well if you are downsizing and have a lot of equity in your existing home. We have several retiree clients who have done this successfully. Of course it means you will likely own two homes for a period of time, and there is a risk that you may own two homes for longer than expected.
7. If you don’t have enough equity in your home, you can use the potential rental income in your existing home to quality for a mortgage on a second home. After buying the second home, you can choose to sell or rent your existing home. Of course, in this case you will own two homes for a period of time, so you have to be comfortable with that scenario.
8. Once you have an accepted offer on your home, you can use bridge financing to buy the second home. Once you have an accepted offer on your home, most banks will approve bridge financing on your new home subject to qualification. Bridge financing allows you to complete the purchase of a new home before you have received funds from the sale of your existing home, so it fills that temporary gap.
9. Obtain private extended financing to buy the second home while still owning your existing home temporarily. This is like bridge financing except you don’t necessarily need an accepted offer on your existing home to qualify for it. Again you may own two properties for a period of time and you could pay up to 10% interest per annum for the extended financing.
10. Put your house on the market subject to buying. When you receive offers, you would counter offer with a seller’s condition that says you have two weeks to secure an accepted offer on a new property otherwise the whole deal is off. This is quite rare but it has been done successfully in strong sellers’ markets when buyers are willing to make substantial concessions. In the cases where we’ve seen this, the sellers already had a new property in mind and were able to secure an accepted offer on the new property and carry out the transaction successfully.
Ranked in the top 10% of Vancouver realtors, our team has substantial experience working with sellers. We will work with you to create a strategy that will bring you the maximum exposure and highest price for your home. We have worked with sellers all over the west side and east side of Vancouver, from Kerrisdale, Point Grey, and Kitsilano to Main, Grandview, and Hastings to help them get the very best price.
*Written by Annette Saliken, YourHomeTeam with Sutton Group Westcoast Realty – 2022