My wife and I are thinking about buying a bigger house. Which comes first: buying the new home, or selling our current house? (Part Two)
The ideal situation for most consumers in your situation is to buy and sell simultaneously, so the closing dates align and you have only one moving day. Unfortunately, that isn’t always possible. I strongly advise you to think carefully about your needs, financial status and tolerance for risk, and ask your real estate salesperson for advice.
As I mentioned last week, the big advantage of buying first is that you can take your time finding a home that’s right for you. The disadvantages are financial in nature: you’ll have to obtain the money to put down a deposit and absorb the cost of bridge financing, if necessary. You could find yourself in the unenviable situation of paying the expenses – including financing costs, insurance and utilities – to maintain two properties for an unknown period.
In my last move, I bought first on the good advice of my salesperson. She believed my place would sell quickly, and it played out precisely as she advised, but there is never a guarantee that it will.
When you sell first, you can set a sale price that meets your needs and you’re under a lot less pressure to accept the first offer that comes your way. And after you have sold your home, you’ll have a better idea of what you can afford to buy.
The drawback to selling first, however, is that as soon as you accept the buyer’s offer the clock will start ticking towards the closing date. You will need to find a new home fairly soon, which might be a problem if you’re highly selective about the location or the type of housing you wish to purchase. You may feel pressured to make an offer on a home that doesn’t exactly fit your lifestyle, or to look at rental units for temporary housing, which would mean moving your furniture and personal belongings twice.
Your salesperson may be able to give you a good idea of how long it might take you to sell your home and for how much money, and to let you know if it will be easy or relatively difficult to find a suitable property. They could also try to negotiate a longer closing date with the buyer’s representative.
And regardless of whether you’re buying or selling first, you should formulate a backup plan if problems emerge: do you have friends or relatives who could lend you money, or provide you with accommodations while you wait for a transaction to close? It’s always nice to know how to handle a worst case scenario.
If you have a question for Joe about the home buying or selling process, please email firstname.lastname@example.org.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.