To buy a new house or sell your existing house first is the classic real-estate conundrum, but there are some key drivers you should be aware of that could help you work out what’s right for you.
It comes down to what the market is up to & your financial position.
The best place to start is by looking at the current market you’de be buying into or selling out of. What are the real estate trends in your state, city, town, and suburb?
Where supply outstrips demand, the result may be lower home prices and longer timeframes to sell. When this is the case, you may prefer to sell your home first so it gives you a better understanding of cash flow and in this market it may take a little longer to find a buyer.
On the other hand, in a sellers’ market there are fewer homes for sale but lots of buyers looking to purchase. Factors like low interest rates ect can play a role but essentially you can be more confident in this market that you will be able to sell fairly quickly and fairly strongly.
The ’buyer’s market’ versus ‘seller’s market’ scenarios are general examples only. There are a lot of things to consider when deciding to buy or sell first, with market conditions being only one of them.
BUYING AND SELLING IN DIFFERENT MARKETS
Things get a little more complicated if the market you’re selling in, and the market you’d like to buy into, are different. If this is the case, you may need to do some additional research with your real estate agent to understand what impacts this might have on your decision.
Next up & even more important than market conditions, is your own financial position.
Firstly, lets discuss the benefits of selling first:
This option is when you need a little more certainty.
Depending on your financial circumstances and the urgency of your next property purchase, selling your home first makes sense for so many reasons.
You know your purchasing power. Once you have sold you know exactly how much capital you have available, and you have the funds ready to make stronger offers on the buying side.
Also, it’s a simpler selling process. It may take that little bit longer for the right buyer to come along to be able to sell at a price you are happy with. Or contrary you may even achieve a result that exceed your expectations under competition and therefore have more purchasing power. In a sellers market, most sell first to take advantage of the inflated money achieved.
Selling first there are also more options. For example, “try before you buy’ where you may rent first to see if you like a particular suburb or even house until you find the right one.
It also means that you’ll get a perspective on whether bridging or other finance is required.
The benefits of buying first:
Buying first when you’re uncertain of your finances can be risky as you’ll be relying on your existing home to sell when you need it to and for the price you want, which doesn’t always go according to plan.
You’ll need strong finances to buy before you sell. Purchasing your new property before selling allows greater control over asset selection but relies on having a strong financial position.
If you are in the fortunate position of being able to access a large pot of cash, have time on your side, and can manage 2 home loans at the same time, then buying your next home first is definitely an option.
You may even have built up significant equity in your current home, putting you in a stronger position to secure finance on your new purchase first.
On the flip side, you may have reduced borrowing power if you have an existing mortgage while applying for another home loan. You may end up managing 2 home loans and combined can amount to a significant value.
Do you calculations upfront, run those numbers!
(This is where the broker comes in)
And most certainly monitor market activity CONSTANTLY. In the world of 24 hour news things change daily. When the market is good take it for a ride. You don’t want to be in a position where purchase in an inflated market and then end up selling in a buyer advantage one!
As always, on the mobile at anytime for a confidential discussion.