My wife and I are thinking about buying a bigger house. Which comes first: buying the new home, or selling our current house? (Part One)
There’s no right or wrong answer to that question, but you and your wife will have to think carefully about your needs, financial status and tolerance for risk before you commit to either strategy, because both options come with advantages and disadvantages. When you’re ready to make a move, I recommend working closely with a registered real estate salesperson who can answer your questions and provide you with advice derived from practical experience.
Let’s briefly discuss the pros and cons of buying first, which was the approach I took for my last home, and leave selling first for next week.
When you commit to buying first, time is on your side during the home search. You have the luxury of thinking carefully about the dwelling type and ownership model that’s right for you, and the freedom to visit an unlimited number of homes in your preferred neighbourhoods until you find one that fits your lifestyle. Moreover, you don’t have to worry about a rapidly-approaching closing deadline, and there’s no danger of you having to find a temporary place to live, or moving twice.
While time is on your side in a buying-first transaction, money isn’t. You will have to find the funds necessary to make a deposit (and possibly also a down payment if you plan on obtaining financing), which could be difficult if your equity is tied up in your current home. And if you are able to make an offer, you might find yourself owning two properties at once for an undetermined length of time. That could mean paying two mortgages as well as other expenses such as home insurance, property taxes and utilities for both homes. With so many bills to pay, you may feel some pressure to set a modest listing price or accept a lower-than-expected offer.
If you find this scenario worrisome, talk to your salesperson. They can’t accurately predict how long it will take for your current house to sell, or for how much money, but can provide you with ballpark estimates, based upon their analysis of market conditions and recent sales of similar properties in your area.
You may also wish to discuss the feasibility of negotiating a long closing date (say, 60 to 90 days) with the seller’s representative, which would give you more time to sell your home. Another option would be to make your offer conditional upon the successful sale of your current home. Keep in mind that such a condition might make your offer less attractive to the seller if a firm offer (no conditions) is on the table.
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.