It’s the house hunter’s chicken or egg conundrum.
Should I play it safe and sell my current property first but risk not finding the right home to move into before the closing date arrives? Or do I buy first to secure my dream home at the chance of running into financial straits if my old one doesn’t sell quick enough.
It’s a dilemma we’ve discussed in the past, but one that requires constant revisiting as there is no one-size fits all answer.
Selling First
In general, traditionalists and the fiscally risk-averse would benefit from selling first. By doing so, you completely avoid a situation where you’re stuck juggling finances or having to cover two mortgages at once.
Plus, by removing urgency from the sale, you can wait for the right offer to arrive rather than resort to accepting the first bid or a lower price just to oust concerns of having your property potentially linger on the market.
When selling first, you’re also less likely to over or under budget when it comes time to purchase your next home. “By knowing how much you earned from your current home, you’re far better informed when determining an appropriate budget on your next home purchase".
That’s a key advantage in the house hunt, “you’ll avoid the risk of needlessly over or under budgeting, as you have all the facts and figures in advance.”
This isn’t a risk-free scenario however. After the sale, your hunt for a new home can quickly turn into a race against the clock thanks to an ever-looming closing date.
In the worst case, you end up rushing the home search and settling for a property that doesn’t tick all boxes on your list of must-haves or putting a high offer to avoid having your bid fall through.
This is particularly true in hot markets such as in Toronto, where properties change hands in record time and homes regularly go for over asking. In such situations, selling first means potentially being left without a new place to call home quick enough.
To make the right decision, it’s important to access real estate activity in both your current and future neighbourhoods.
If homes for sale on your street tend to linger and the market is slow, selling first may be the better option. If you don’t have the capital to pull off bridge financing, playing it safe and kicking off the process by listing your old home first is also safer bet.
However, if real restate get snatched up quick in your desired area, waiting to buy can put you at a disadvantage and you can be left with far fewer choices.
The type of property also plays a big role. Free-hold homes in the GTA have been constrained by tight-supply, regularly driving prices over asking and spending as little as 20 days on the market. On the other hand, the condominium market has managed to keep pace with demand and is less prone to feverish bidding wars.
As a contingency plan, it’s recommended you set aside a budget in case you are unable to find the right home in time and have to rent in the interim.
Buying First
By choosing to kick off the hunt for a new home first, you’re free from the constraints of an impending closing date and can invest more time towards finding the right property in your desired neighbourhood.
If a situation arises where your offer doesn’t go through, you’ll have the upper hand as you have enough time to keep searching. There’s no settling or buyer’s remorse.
Buying first also better serves those who have a great deal fall in their lap, and can’t pass up an opportunity to bid on a home right away at the risk of having it slip through their fingers.
Market conditions matter as well.
Given the GTA is in the midst of a sustained seller’s market, where demand regularly outstrips supply, the notion that your home will linger on the market doesn’t necessarily reign true. That means, many can afford to buy first knowing their old property will sell relatively quickly and the financial burden of owning two-homes isn’t an impending threat.
Yet, it’s important to understand how real estate is playing out in your specific neighbourhood – even at the street level. City-wide-trends are not always evocative of the market on a neighbourhood basis and activity could be tepid around your area.
For those contemplating buying first, you have to be aware that a temporary transitional period where you get stuck owning two properties at the same time is a possibility, and to account for it.
Therefore, it’s important to understand how financially sound you are and whether you have the capital or the ability to access an extra line of credit to cover the added costs if the situation calls for it.
If you decide to buy first, there are safeguards against a situation of owning two homes. When making an offer, you can stipulate your offer will only go through on the condition that your old home is sold as well. It’s worth noting however, this can dampen the strength of your offer in the seller’s eyes, who may opt for another bidder.
Silver Lining
No matter which way you look at it, there are a handful of pros and cons on both sides. Before making a decision, it’s important to assess your risk tolerance, financial situation and speak with a real estate professional on the market conditions in your local area.
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We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market.
Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome!
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