Published at: 2/6/2017 1:41:18 PM
Home buying is often a highly emotional process, but when it comes to upgrading to your next home it pays to set emotions aside – at least for a moment. Purchasing property is a major financial step, and a key decision that needs to be made early on is whether to buy – or sell – first.
Once you’ve decided the time has come to upgrade to your next home, it can be tempting to hit the open home inspections before the ‘for sale’ sign has even been hammered into your lawn. That’s understandable. After all, with some equity built up in a much-loved home it can be exciting to check out the sort of properties you can afford.
In fact, buying before you sell can offer a number of advantages. In a market where home values are rising quickly you could save on the price of your next home by locking in today’s prices, and letting the market upswing add to the value of your current home. It also means you can move straight into your new place without the need for interim accommodation or the extra cost of storage for your furniture and other belongings.
However, the key downside is that no one can say for sure how long it will take for your home to sell. Despite the listing agent’s likely optimism for a fast sale, there is a very real risk that it could take far longer than anticipated to find a genuine buyer for your place. The worst-case scenario is that buying first could see you juggling not one but two home loans for an indefinite period of time.
One way out of this potentially highly stressful situation is to reduce the asking price for your current home in order to speed up the sale process. However, this brings the prospect of being short-changed on the value of your home and, as a result, you may need to borrow more than expected to cover the cost of your next property.
An alternative approach is to wait until your home is sold before making an offer on your next place. The advantage here is a clean financial sweep, without the stress of funding two separate properties. With money in the bank from the sale proceeds of your current home you also have a firm idea of how much cash can be tipped into the new place – and how much you’ll need to borrow.
If you plan on taking this approach, be sure to consider where you will live while you find a new home that’s ideal for your needs. Whether it’s couch-surfing with friends and family or renting for a while, you need to be able to handle the costs and inconvenience of moving twice. The last you thing you need is to make a rushed decision on your next home.
It can be possible to strike it lucky by negotiating with either the buyer of your current property or the vendor of your next place for an extended settlement period. This could buy you enough time to enjoy a seamless changeover from one home to the next. It’s a long shot, but it’s something worth enquiring about as the buyer or vendor you’re working with could be in much the same position as you.