So how do you decide which is the right way?
Ask yourself these questions:
1. Are you comfortable with risk?
Your risk profile and risk management should play a major role in your decision. If you are comfortable with taking risk, then buying first is the best decision, especially in a bullish market and you are able to win a long settlement.
If you are someone who tries to avoid risk as much as possible, sell first as the financial risk will be lower because you know exactly how much you need to spend.
2. What are your reasons for buying and selling?
Your decision will be influenced by your individual reasons for buying and selling.
If your reason for trading homes is urgent, it may be best to find a suitable property in your chosen area, buy it and then sell your existing home. This is because supply and demand may come into play, especially in a tightly held area. You may end up waiting a few months to find another property.
3. Is the market up or down?
It will help to find out what the buying and selling cycles are in the market. If the market is up and prices are as well, then you can have a little more assurance to buy first knowing the chances are high that your property will sell fast. If the market is down and the forecast is gloomy, there’s a small probability that you will be able to unload your property that easily and fast.
Pros and Cons of Selling Before Buying
- If you can secure a delayed settlement you have plenty of time to purchase another home and move to your new address before selling your old home.
- The urgency to sell the place within a specific deadline is significantly less.
- Potential buyers have fewer ammunition on you if you have not already purchased and badly needed to sell.
- You could end up homeless if you are too choosy, no good properties are on the market or you just miss out on a few properties. Of course, you can sign a short-term lease, but there’s the additional cost and bother of moving two times.
- Prices may increase after you sell and there’s a possibility of you being priced out of the market, or fail to get your dream house for the right price.
- You’d be left with no choice but what’s currently available on the market.
Pros and Cons of Buying Before Selling
- A chance of obtaining a conditional offer subject to the sale of your existing home
- Having no financial pressure to commit until your find your dream house
- In a bullish market you could get more for your money and gain more from the sale of your home later on.
- The added expense and hassle of bridging finance when you have to pay for two mortgages simultaneously
- Conditional offers can keep vendors away and make them hesitant to settle on a price.
- You might need to up your offer to sway the owner not to sell to anybody while you iron out your situation.
And finally, speak to the specialists. Your accountant, your financial institution or mortgage broker and your trusted real estate agent well in advance.
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