Use this guide to understand the pros and cons of buying first or selling first when moving homes.
As an existing homeowner, you might be considering a home upgrade to a quieter neighbourhood, or simply looking to upsize your property to gain more living space.
One question that has likely come up during this process: should you sell your current home first or buy first and worry about the sale later?
Is now a good time to move?
While rumours of a real estate market crash circulated during the early days of COVID-19, the reality has been quite different in the last few months. The average home sits on the market for just 14 days in Toronto (July 2020).
Homes are selling quickly and inventory is low. This means that if you have to wait for your current home to sell first, you could miss out on making a bid on your dream listing.
Another option would be to buy a home before selling yours —but this also comes with pros and cons. It’s a challenging scenario either way:
Sell first, and you risk needing to move twice and find a temporary rental to bridge the gap.
Buy first, and you may have to make a reduced offer because you haven’t sold your current home and your equity is tied up in the old place.
No matter which option you choose, it is a challenge to keep your moving costs low and to line up purchase and sale timelines.
This post outlines the pros and cons to determine if you should buy or sell first. Buying and selling a home at the same time is no walk in the park, and requires a clear understanding of the steps involved.
Sell First, Then Buy A Home
If your biggest concerns are financial, selling your home first is the quickest way to unlock your current home’s equity. By selling your home, you’ll know exactly how much money you have to put towards your new home purchase. Selling first is the most efficient way to stick to a precise budget.
Selling your home first provides you with some much-needed confidence to upgrade to a new home. You have the security of knowing you’ve completed a critical part of the process.
Closing date pressure
While selling your house secures your budget, it also establishes a hard and fast deadline for moving out. Having a looming closing date might put an undue rush on your home search process. In a worst-case scenario, this leaves you spending more than you had planned or buying a house you aren’t super excited about because of this added pressure. It is stressful trying to line up purchase and sale timelines or needing to move into temporary accommodations.
Selling and buying a home around the same time makes it pretty difficult to avoid moving twice, especially if you’re unable to secure your new home at the same time. You might get stuck having to rent between selling your old home and moving into your new one if you aren’t able to align the closing dates.
The additional costs of temporarily relocating before finally moving into your new home can add up quickly. Moving costs, storage costs, and not to mention the time taken out of your day are just a couple to consider.
Living through a listing process during COVID-19 is stressful
You need to manage frequent visits from strangers for repairs, staging, open houses and showings. As if buying a new home isn’t stressful enough, having to determine where to store your furniture while relocating adds more to your plate. It’s important to consider what you have the emotional bandwidth for before selling your house.
Buy First, Then Sell Your Home
Your timelines, your rules
In Toronto’s competitive housing market, buyers need to be able to act fast to avoid missing out on a home they love. Buying a house before selling allows you to take your time looking for your next home upgrade. You don’t have a closing date to worry about, and can move at your own pace.
Let’s be real, the process of listing your condo and doing showings during COVID while you live (and potentially still work) in your place is scary. It’s stressful having numerous people in and out of your house day and night. Not to mention all the added sanitization practices required to sell a home now. But all of this can be avoided by moving out first!
A smoother transition
By buying a house before selling, you radically simplify the move-out/move-in process. Moving happens only once, and on your terms, as slowly or quickly as you want.
It’s hard to keep a house in the pristine condition required for selling with kids running around. Keeping your home in a show-worthy state might be easier if you opt to move out before selling your home. You’ll also avoid having to move your kids twice, which can be emotionally taxing for them.
The right opportunity
Your next home could be your dream home, perhaps in your ideal neighbourhood like the Beach, Roncesvalles, or a home with the exact features you desire. Maybe it has that dream view of the Toronto skyline or an unbeatable backyard. These opportunities are rare and require buyers to move quickly. It’s hard to move quickly if you are waiting for your existing house to sell.
Paying two mortgages
The number one concern for those considering buying a house before selling is the risk of owning two properties, even if for a short time, and thus paying two separate mortgages. The financial costs can add additional pressure of finding a buyer quickly, which could provoke you to sell your house for a lower price than you’d initially planned.
Finding the necessary capital
If you’re buying a home before selling, you still need to have the money lined up to execute the transaction. And not everyone has a couple hundred thousand dollars in savings ready to throw down on a second home. A bridge loan can offer a possible solution. But bridge loans mean added interest payments and may come with undesirable conditions and costs.
A Third Option: The Best Of Both Worlds
Choosing whether to buy or sell before upgrading to a new home is a personal decision that should weigh in both the financial benefits and risks and the emotional considerations. If you wish there were a middle ground, we’ve got good news.
You can work with Properly to buy before you sell, while still unlocking the benefits of selling first with a guaranteed backup offer. You’ll get all of the ‘Pros’ while avoiding most of the ‘Cons’.
Here’s how it works:
1. Get a guaranteed backup offer from Properly
Use our backup offer to secure firm financing from the bank quickly.
2. Buy your next home with your unlocked equity
We’ll help you tour homes, negotiate, and make a winning offer.
3. After you move out, we’ll sell your home – guaranteed
If your home doesn’t sell on the market within 90 days, we’ll buy it directly from you at our backup offer price. Plus, you pay the same commission any other real estate agent would charge, and Properly pays for the mortgage on your old home until it sells.
Go to properly.ca to learn more, and schedule a call with our team whenever you’re ready to get started.
For more expert advice on buying, selling, and financing, head back to the Properly blog.