If you know it’s time to move, you’re already one step in the right direction. Whether you’re up-sizing to accommodate a growing family, your job is being relocated, or maybe you just want to find a better neighbourhood for your kids. Whatever your motivation is, you know it’s time.
But should you buy first, or sell first?
The answer?…….It depends.
Let’s look at some key factors that would affect this decision.
Is it a buyer’s market or a seller’s market?
If it’s a Buyer’s Market it almost always makes sense to sell your home first. There’s more listings than there are buyers, so your home may take a little while to sell. Say you were to buy first, you’d probably be stressing out if the house you’re trying to sell isn’t getting much action, which could put you in an awkward position to reduce the list price in order to sell in time. Your hand could be forced to do whatever it takes to get the house sold, and the end result would be you not getting full value for your home. Of course, there are options. You could have your Realtor® inform everyone that all offers on your home must include a Seller Accommodation Clause. This would allow you a certain amount of time to find a house while not being bound by a firm contract. Still, this is something that could scare of buyers who are serious about purchasing your home otherwise, and normally they won’t be willing to give you more than a few weeks, leading to further pressure. It’s a bit of a toss up, but in a strong buyer’s market…I would lead toward selling first.
If it’s a Seller’s Market the answer is a little less straightforward. This is where the balancing act really comes in. As a Realtor® I always tell my clients that my number one job first and foremost is to protect them. My second job is to help them buy or sell a house. When it comes to a seller’s market its important to realize a few things.
Number 1. Buyer’s are competing for homes because there’s a shortage of inventory.
Number 2. As a buyer you’ll need a relatively “clean” offer if you stand a chance at getting a home, especially if it’s within a desirable price range and it’s located in a sought-after neighbourhood.
If you haven’t sold your house yet, you’ll have a hard time putting an offer in on another house without using a condition that states you need time to sell your house first (Sale of Buyer’s Property Condition). Since the internet keeps people so well informed these days, sellers will not only be looking for the best price, but they’ll want to see offers with the fewest conditions. Unless you can afford to carry two homes, you’ll need to use a Sale of Buyer’s Property condition, which will make your offer less desirable and create a bit of an obstacle course when you’re trying to buy a home.
Having your home at least listed before you seriously start looking for your next home would be a wise step. The balancing act comes in when you suddenly receive an offer on your house, but you haven’t yet found a house to purchase (because you probably will in a seller’s market if you’ve priced your home correctly). Your current house is almost sold, so you’re putting on your buyer hat now, which means you’ll likely be competing against others for a home. You’ll want a strong offer (having your current home sold), but you also want to protect yourself. So, if you have a conditional period on the sale of your home where the buyers have time to fulfill some terms you should start to seriously look for a house now! You’re in a good position to buy a home without having to weaken the offer with a crazy amount of conditions, so you’ve increased your chances of landing a home that is suitable for you.
However, the sale of your home could still fall through so try to get the time frames to line up in your favour. If the buyers of your house have until next Wednesday to fulfill their conditions, give yourself a day longer on your new purchase to fulfill your conditions. This is the balancing act that we talked about earlier. It can be a bit tricky sometimes, but it’s sometimes necessary in hot markets.
Overall I would suggest that selling your house first is the best option.
And here’s why:
Let’s say you sell your house, but for some reason you couldn’t find a new home that suits your needs, you could always use temporary housing, and this is worst case scenario. Quite often closing dates can be adjusted to allow you more time, and most people will work with one another to make the deal happen.
You buy a house without selling yours first and then nobody buys your home. Come closing day if you’re stuck with two homes, the bank isn’t likely to lend you the money and you’ll default on your contract. That’s when you’re heading to court, and you’re probably not going to win.
If it had to be one or the other, I would pick option number one any day of the week.
Some other things to consider
None of this advice is black and white, nor should it be interpreted that way. There’s always situations that can change the way you approach the process. For example, if you’re selling a home that’s in a price range where homes are selling within a few days but you’re buying a home in a price bracket that’s taking weeks to sell, we would need to adjust our strategy a little. The opposite is true if you’re downsizing from a large home where there will be fewer interested buyers, but you’re purchasing a retirement sized home that’s highly sought-after.
The key to every situation is to adjust as needed and always be prepared for everything.
The best advice I can give you:
- Carefully consider market conditions.
- Find a good Realtor® who can competently converse with you about this subject.
- Always do your homework and consider all options when buying or selling a home.
- Don’t let yourself get into a situation where you’re stuck.
- Use the appropriate conditions in an offer that allow you a way out if something else doesn’t happen that was supposed to. This goes back to not getting stuck.
But most importantly, have fun and enjoy the process!
I’d love to hear your questions and comments!
Jason Reynolds is a passionate and driven Realtor® located in Peterborough, Ontario. He devotes himself to helping his clients through education and experience. Sitting on multiple committees in his home city enables him to stay informed of important regulations and community events that affect the real estate market, thus allowing him to give his clients the absolute best service they deserve. Jason is happy to take on new clients and is always available for questions and advice.