Swain says he believes the risks of selling before buying another property are more manageable, while the advantages are more beneficial. So, should a seller sell their property before buying another, or buy the next one first, before selling the current one?
“It’s the eternal question,” says Bruce Swain, MD of Leapfrog Property Group.
“Both options have their own advantages and risks, but all things considered I’d generally advise selling before purchasing another home.”
Swain gives advice:
The risks of selling before you buy Swain says he believes the risks of selling before buying another property are more manageable, while the advantages are more beneficial. “Essentially, there are two risks when selling your property first. You might find that you’re not able to find and buy the right property as quickly as you’d hoped, and while you wait you may need to rent, which is an added cost,” he says.
“Secondly, you might find that prices have gone up in the interim, and that you’re now not able to buy into a higher, or even similar price bracket as before.”
Swain says these risks can be avoided by carefully managing the sale of a current property - it’s possible to extend the settlement date of a property in order to have enough of a time buffer to select and purchase a new property.
The advantages of selling first
Swain says there are a number of reasons why it’s in a seller’s best interest to sell, and then to buy.
These include:
- Putting the seller in a stronger position when buying, as he or she will have the funds available to purchase a new home - something that’s increasingly attractive to both buyers and mortgage lenders. As the uncertainty around the local economy increases, more and more banks are asking for larger deposits.
- Because the seller doesn’t need to make a quick sale in order not to pay two mortgages, for example, they won’t be pressurised into selling cheaply.
- Having time also puts the seller into a stronger negotiation position.
- Sellers will know exactly how much they can spend on a new property and won’t be dependent on getting the right sales price to fund the property they’re already in the process of buying.
- If prices are falling, houses get more affordable as you wait.
While no strategy is foolproof, Swain says there are a number of things sellers can do to ensure that they don’t end up having to rent while the transfer of the new property goes through, or lose out as the property prices start going up and they can’t afford a similar property anymore.
Swain says the most important moves are to: