Sell your home first and begin searching for your new home thereafter, or buy a home first and then sell your house thereafter? To work out the answer to this sell first or buy first dilemma, you need to ask yourself two questions: (1) what are your financing options and (2) what are the current market conditions?
QUESTION 1: HOW ARE YOU FINANCING THE NEW HOME?
A) I’m selling my current home as equity for my new home
In this case, there will be a suspensive condition in your OTP that states that the sale of the home will only go ahead once your property has been sold. In situations where there is more than one offer on the table, sellers may therefore choose to reject your offer in favour of a buyer who already has the necessary financing available.
B) I’m setting up bridging finance
You could also set up a bridging finance option on your current home loan. The bridging finance will be based on the equity available on the property, your credit record and the expected cash inflow. This reduces the risk of your offer being rejected owing to a lack of readily available finances as you can use these funds to pay the transfer fees so that the transfer process is not delayed. However, it can end up being a rather costly option.
C) I’m purchasing cash
If you can afford to purchase a second home without first selling your first home, sadly, working out the answer to this question doesn’t become much simpler. Should you choose to buy first, you carry the risk of having to pay off two bonds while you wait for the sale of your first home. Should you choose to sell first, you run the risk of rushing your purchase in order to avoid or limit the amount of time spent in a temporary living situation before you move into your new home.
QUESTION 2: WHAT IS THE STATE OF THE MARKET?
You should also consider whether the local market currently favours buyers or sellers, and how this will affect your ability to sell and find a home that meets all your criteria in the given market. A real estate professional can tell you about current stock levels, the average amount of time homes in the area are sitting on the market, and how much they are selling for. This can help you gauge possible time frames on both the selling and buying processes to help you decide whether it is better to sell first or buy first.
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