When the decision is made to sell your present home and buy a new one then for most, they are anxious to get out and see what is available to them on the market. It then raises the question as to whether they should be patient and wait until they sell the present home first. But, this then puts pressure on the homeowner as a seller to find another house as quickly as possible.
Buying a new home isn’t something that should be done in haste but if the present home is sold this is the type of circumstance it can create. Then again, buying a house without selling the current house can create another type of stress which has to do with the finances. So which is better or which is worse?
- Is It Better To Sell House Before Buying?
- How To Buy A House Before Selling Yours In Ontario
Is It Better To Sell House Before Buying?
The answer to this question can be different for each home seller as it depends on the circumstances at the time. Here are some points to consider when trying to determine the right answer for you.
What Time Of Year Are You Selling Your House?
How fast houses sell fluctuates each month. For example, house sales are at their lowest in January. Opposite to this is house sales are at their peak in June. This data indicates that you would most likely sell your house faster in June. So this month, you would be at less risk of being stuck with the house you want to sell. If you decide to buy first? Keeping in mind though that there will be more competition. More buyers may be interested in the home you want to buy.
- Answer: When you are buying in June it may be better to buy your new house first.
If you are buying in December, it may be better to sell your current house first.
Do You Need to Sell Your House First Before Buying?
There may be a necessity for you to sell your home first before you buy because of finances. You may have a mortgage on your current home. This could stop you from qualifying for a new mortgage on a home that you purchase. You should speak with your financial institution to determine exactly what your financial status is. If you can qualify for a new mortgage without having to sell your current home, then it might not be better for you to sell your home first. This way you can shop for houses during the month where there is less competition from other buyers.
- Answer: If you are not able to finance a new home it may be better to sell your home first.
If financing allows you to buy a new home without selling, then you may be better to buy your new home first.
Is There an Urgency to Buy a House in a Specific Neighborhood?
It could be that you need to move to a specific neighbourhood. Perhaps this is a location where you want the kids to be able to attend a specific school. Or it may be that you need to relocate for a new job.
- Answer: If all the other circumstances like finances are in your favour it may be better to buy your new home first.
Dealing With the Stress
There is a certain amount of stress that comes with buying a house before the current one is sold.
- Answer: If the stress of owning two homes for some time is too much for you then you are better off selling your current home first.
- If the stress of having a limited amount of time to buy a new house due to the closing date of sale on your current house is too much for you, then you are better to buy your new home first.
How To Buy A House Before Selling Yours In Ontario
There is a solution to buying a house first before selling yours. This is to find the home that you are interested in buying then putting a conditional offer on it. The conditions can vary.
Conditional Offer or Right of First Refusal
As the home buyer, you can put a condition into your offer to purchase. The condition is you will buy the house provided that yours sells. But, this doesn’t mean that the home seller cannot continue to try and sell the home. It remains on the open market.
If the home seller gets another offer to buy they have to give you the first right of refusal. This means they have to notify you that they have had another offer to purchase. If this happens, then you either have to go firm with your offer or take it off the table. Going firm would mean that you would lift the condition of sale you had on your offer and make a firm commitment to buy the house no matter whether your existing home sold or not.
The advantages of this type of offer are that it does give you some time to focus on getting your house sold. Realtors that are showing the house you have put an offer on has to disclose that there is a conditional offer on the house to other prospective buyers. In some cases, because there is already an offer on the house, they are no longer interested in it.
With the conditional offer, you are no longer looking at other homes to buy. If the home seller gets another offer and you don’t firm up then you have lost out on the home you wanted. Or, you are forced into firming up the offer and now have the stress of owning two homes for some time.
Knowing that you have a conditional offer on another home may lead you into selling your home for less than what you intended because of the pressure of having this conditional offer. The conditional offer does put more pressure on you to get your home sold as quickly as possible.
Taking the Risk
It is a risk to buy your home first:
- You are more likely to get the home that you want.
- The task of home shopping has been taken care of.
- If it is a buyer’s market, you can take advantage of this.
- You have more pressure to get your house sold.
- Your sale will have a set closing date that the buyers of your home will have to agree to.
- It may be that you will have to alter the asking price of your home because of the pressure you are under.
- You could end up having to carry the expenses of two homes for a while.
Playing it Safe
This is when you have sold your home first before buying
- There is the peace of mind knowing that your house is sold.
- Most likely you have not had to alter your asking price because of pressure.
- You now know what your finances are. This can help you determine what you can afford with a new house purchase.
- You now have a limited amount of time to decide on a new house purchase.
- The closing date for the new house will have to be compatible with the closing date of your current house sale.
- You may be limited in the choices of houses that are available to you if it is a seller’s market.
Only you can decide as to which is best for you. Selling your home first, or buying your new home first?