If you're buying a new home and selling your old one, you'll need to decide which to do first. Here's how to think about it.
 

Use market stats to align your dates

If you're buying first, you should have an idea how long it will take to sell your current home. Find out the average days on market and time until completion and then estimate how long you’ll need to complete your own sale.

For instance, if homes comparable to yours are spending an average of thirty days on market, and the standard time until completion is sixty days, you should try to negotiate a ninety day completion on your purchase to allow for the sale of your current home.

Set a conservative budget

One of the risks of buying first is that you don’t know how much your home is going to sell for. To avoid being strung out if your home sells for less than you expect you should stay well within your budget. And start with a conservative budget.

Get a Comparative Market Analysis of your current home 

To know what you can afford you should know what you will get. Any REALTOR® will be tickled pink to provide you with a Comparative Market Analysis, which involves (ideally) a visit to your home and a comparison with active and sold properties. This gives you the projected market value of your home. Your REALTOR® can also let you know the average days on market and whether it’s a seller’s or a buyer’s market.

With this projected market value and a pre-approval amount from your mortgage broker you can set a conservative purchase budget that will keep you out of the weeds.

Aim for a few days between completion & possession

You’d like to avoid bridge financing, and it would be nice to have some extra time to move, so see if you can get back-to-back completion and possession on your purchase, with a few days between on the sale of your own home.

You want it to go like this:

1. Sale of your home completes
2. Purchase of your new home completes
3. You get possession of your new home
4. You move out of your old home

But, you know, don’t get weird about it. It’ll all work out.

Try for a “subject to sale” condition

A subject to sale condition means the purchase of your new home is conditional on the sale of your old home within a reasonable period. This gives you an ejector seat from the deal.

Don’t count on getting one of these unless it’s a buyer’s market, I.e. high inventory, low demand - a state rarely seen in Victoria.

Look into bridge financing

Bridge financing tides you over if your new purchase completes before you get paid for your current home. Equity is drawn from the old home to make the down payment on the new home. You usually have to have a firm offer on both properties before a lender will consider bridge financing, and the interest can be quite high. But what the hell, you can’t take it with you.

Joking! It’s a big deal, take it seriously.

Just tell me already: should I buy or sell first?!?

Down, tiger! First you have to know if you’re in a Buyer’s or a Seller’s Market. 

In a Seller’s Market demand is high and supply is low, leading to quick sales and high prices. In this environment you might want to buy first and sell afterwards - you have a good chance of a quick sale (as long as you price it right) and if you’ve already bought a home you can line up the dates to avoid temporary homelessness and bridge financing.

In a Buyer’s Market, when prices might fall and days on market stretch into a desperate infinity, buying before you sell can be very risky. You could end up selling for less than you’d like and taking longer than you’d like.

Just FYI, we haven’t seen an extended Buyer’s Market in Victoria since 2014.

Peace out!

Photo by Rob Schreckhise on Unsplash