Should I sell before I buy, or vice versa?
This is an age-old question to which there is no one-size-fits-all answer. In a magical world where you could wave a wand and have everything align, there wouldn’t be an issue, but that’s not reality. This is a tough and complex decision.
The truth is that there are both upsides and downsides, whether you sell first or buy first. Determining what is right for you will require carefully considering a number of things, including your needs, preferences, and financial circumstances, as well as your tolerance for risk, and market conditions.
If you choose to buy a new home before selling your current one, it’s important that you review your finances to assess whether this is feasible for you. Here are some questions to ask yourself.
- If you find a home you like, will you have sufficient funds readily available for a deposit, down payment, and closing costs (such as land transfer tax and legal fees), or are you depending on your current property’s equity?
- Can you afford to carry two home mortgages at the same time (commonly called bridge financing) and related expenses (such as utilities, property taxes, and maintenance costs), if necessary. If so, for how long?
If the answer to either of these is no, then buying first may be too risky and you may instead want to begin by selling.
This decision is even more critical now, as we approach the end of 2022, given that the cost of living has increased, the real estate market has cooled down in many parts of the province, interest rates are rising, and more stringent stress tests are making it harder to get mortgage approval.
When you choose to sell first, you can be more selective with the offers that come your way. Once you sell your current home, however, the clock will start ticking and you will have a limited amount of time to find your next place before the new owners take possession. But the benefit is that you know what you can afford to buy next.
If you can’t find a suitable property or the closing date is later, you will have to find somewhere to live for the weeks or months until you take possession of your new home. This can be stressful, especially if you have young children or elderly relatives living with you.
If you are still unsure what to do first, I highly recommend that you work with a real estate agent. They can monitor market trends in your area and provide strategic advice to help you make an informed choice.
If you have a question for Joe about the home buying or selling process, please email email@example.com.
This column is for general information purposes only and is not meant as legal or professional advice on real estate transactions.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.