Should I Buy a House First or Sell First?

If you are a homeowner and you decide to enter the market, you’re faced with a difficult question, especially if you’ve never sold your home before. Do you buy your next home before selling? Or do you sell your current home before buying?

Over the years, this has become a common question for housing experts. Of course, the answer will depend on various factors. The one factor that many real estate experts consider is the transition period between the two market stages. Typically, banks will provide financing to cover any temporary overlap. Still, the drawback is that it will consist of a higher interest rates at a time when you may be paying two mortgages simultaneously, in addition to double utility bills.

Of course, there is the other issue of the market. The majority of our RE/MAX Influencers agreed that each situation is unique, and several factors need to be looked at to determine the answer to that question. For example: What are the current market conditions? And are you financially capable of carrying two properties with ease?

“It absolutely depends on the market situation,” says Justus Smith, RE/MAX Crown Real Estate (East). “If the client is selling in a hot seller’s market, then they would likely want to find their next home first and buy it. However, if they are selling in a buyer’s market, it’s better to get their property sold before venturing out to purchase another home.”

So, with the technicalities out of the way, let’s get back to the brass tacks: Is it better to buy first or sell first? Let’s examine the advantages and disadvantages and also hear what some experts have to say on this issue.

Should I Buy a House First or Sell?

Here are the pros and cons of buying first:

The immediate benefit of buying first is that you can take your time to find the right home for you and your family, whether it is in the right neighbourhood or has sufficient space for your household members. Ultimately, it comes down to establishing the best timeline to make the change from your current home to your new property.

“The ideal situation is to purchase a home and then sell your current property,” says Sarah Leib, RE/MAX River City.

“Buying without having to sell first allows buyers to find the right home at their own pace,” adds Shauna Bailey, RE/MAX Crown Real Estate North.

You can also reduce the anxiety of finding temporary housing or storing your belongings by having the new house ready for you as soon as you complete the transaction on your current home.

Indeed, this situation isn’t financially feasible for everyone. A disadvantage might be the cost. Your expenses may be temporarily doubled, and cash could be tight since a huge chunk of your finances might have been dedicated to purchasing your new home.

Additionally, industry experts note that it may be possible to add a sale of home condition to the offer; however, competing offers without that condition will likely be more desirable.

Buyers should consult with their lender to discuss the possibility to arrange interim financing, therefore enabling them to make an offer without this condition—provided they qualify—with the intention of ultimately selling their current home once they confirm the new purchase.

Here Are the Pros and Cons of Selling Your Home First

Is selling first a workable endeavour? Well, with enough due diligence and careful planning, taking this next step in homeownership could turn out to be a good decision, though there could be some bumps along the way.

Housing experts say that selling first can help you produce a better home-buying budget and accurately calculate how much you can work with when purchasing a new home. Additionally, the sale’s proceeds can be allocated toward the down payment on your next home, meaning you do not have to dip in your emergency savings, rainy-day fund, or retirement portfolio.

The other advantage is that you can take your time. Now that you have sold your current house, you are not rushed to find the right home. At the same time, you can also negotiate a better purchase price.

One more thing: You are not doubling your monthly spending because you are not carrying two mortgages or paying twice the utility bills. Remember, in today’s economic climate, many aren’t able to afford the cost of carrying two properties, and trying to do so may cause significant stress.

The risk of having to discount your home to create a quick sale just isn’t a pleasant experience. Clients can negotiate a better purchase price being strong on finance.

“It really depends how comfortable my clients are to have the possibility to have to bridge finance or carry two mortgages. I always suggest to sell first, but there are a lot of buyers out there who are scared they won’t find what they are looking for,” says Elio Parente, RE/MAX City Realty.

In the broader housing market, industry observers warn that price increases in the real estate industry could make buying your next home costlier than you projected. If you cannot find a new house in time, it could become more expensive when you are forced to rent and sign a lease, especially as rental units keep climbing.

Ask the Right Questions

In the end, it is about determining what is suitable for you and your family. Doing this involves asking the right questions.

• Do you have sufficient funds for a down payment on a new home, or are you counting on the proceeds from the sale of your current home?
• Could you handle carrying two mortgages, even if it is for a few months?
• Is your housing market tilting toward buyers or sellers?
• Do you have any emergency plans should things not work out in your favour?

If you can answer these questions accurately, have done your research, and are working with a real estate agent, you can be confident in your housing transition.