If you find yourself captivated by a particular house while your own property remains unsold, you may understandably ponder the optimal sequence of actions between buying and selling. Similarly, if your preference is to sell first but you hold concerns about promptly finding another suitable house, the question of which step to take first becomes less straightforward.
The answer to this inquiry is contingent upon individual circumstances. However, our realtors in Joliette are equipped to provide you with distinct advantages and disadvantages associated with both scenarios.
Case 1: Selling before buying a new home
Here are a few things you need to know if you want to sell before buying.
Advantages of selling before buying
It is important to note that these advantages are general, and seeking advice from a real estate broker specific to your situation is crucial for making informed decisions.
Enhanced financial stability
By selling your current property before purchasing a new one, you gain a clear understanding of the funds available for your new purchase. This knowledge of your budget eliminates uncertainties associated with relying on the sale of your home to finance the acquisition of a new property.
Selling first helps you avoid the burden of simultaneous mortgages, which can pose significant financial strain. It also mitigates the risk of struggling to meet mortgage payments if your old home takes longer to sell than anticipated.
Increased flexibility in your search
Opting to sell first provides the freedom to explore potential properties without the pressure of an imminent deadline driven by financial or logistical constraints. This grants you the opportunity to thoroughly research and identify a property that aligns with your specific needs and criteria.
Furthermore, as a buyer without contingencies, you may have an advantage in negotiations. This position allows for shorter lead times or potential leverage in negotiating a lower price for the new property. Sellers often favor offers from buyers who do not have sales contingencies, giving you an edge in the negotiation process.
Smooth transition
We recently discussed the psychological aspect of real estate, which also applies to this aspect. Selling your current home first enables you to plan a seamless transition to your new property, both practically and emotionally. You have ample time to organize and make necessary arrangements, ensuring a smoother move and settlement into your new home without the urgency of vacating your current residence.
Taking the time between selling and buying allows you to process the emotions tied to leaving your old home. It provides an opportunity to reflect on the changes and digest the various steps involved in the new purchase, helping you better navigate the transition.
Disadvantages of selling before buying
Here are some drawbacks to consider when selling a property before purchasing a new one.
Temporary accommodation and storage needs
Selling your home before buying a new property may leave you without a place to live during a transitional period. This could entail finding temporary accommodation, such as renting an apartment or staying with relatives, which can be inconvenient and incur additional costs. These expenses should not be underestimated.
If you are unable to immediately secure a new home after selling your previous one, you may need to arrange for storage of your belongings in a warehouse or with relatives. This, too, brings about extra costs and complications associated with managing storage and access to your possessions.
Pressure to find a new home quickly
Not having a permanent residence following the sale of your house can create a sense of urgency to find a new property swiftly. This can limit the time available for thorough home searches, comparing options, and making well-informed decisions. Consequently, you may find yourself compromising on your search criteria and potentially missing out on the best time to buy a house.
When you sell first, there is no guarantee that you will immediately find a new home that meets all your requirements and preferences. This uncertainty about long-term housing arrangements can lead to stress and discomfort.
Fluctuating market conditions
Opting to sell before buying exposes you to potential changes in the real estate market. If housing prices are on the rise, waiting to sell before purchasing could result in higher prices when you are ready to buy. This may make buying a new property more expensive and could cause you to miss out on an opportunity to purchase at a lower price point.
Furthermore, market conditions can fluctuate during the gap between selling your current home and acquiring a new one. Interest rates may increase, supply and demand dynamics may shift, impacting prices and the availability of suitable options for purchase.
Case 2: Buying a home before selling
Purchasing a home before selling your current property can be a strategy that carries certain risks, as it involves investing funds prior to realizing profits. However, it also presents potential advantages when approached with careful market analysis and consideration.
Benefits of buying before selling
If you can manage it, buying before selling presents significant advantages in the realm of real estate decisions.
Assured housing stability
Acquiring your new home before selling your current one provides a sense of housing security, eliminating the need to search for temporary accommodations or navigate strict deadlines between sale and purchase. This reduces stress and uncertainty associated with transitioning from one property to another.
Furthermore, buying first allows you to maintain stability in your daily life, as you can continue living in your current home until you are ready to move into the new property.
Opportunity awareness
By decoupling your buying decision from the sale of your current property, you can enjoy peace of mind and a better understanding of the real estate market. Buying before selling enables you to actively seek and seize the best opportunities, rather than waiting for a sale to occur first.
Enhanced negotiation flexibility
Purchasing a home before selling provides the luxury of time to sell your current property without feeling pressured by tight deadlines. As a seller, you have the freedom to wait for attractive purchase offers or wait for more favorable market conditions before listing your home for sale. This increases your chances of achieving a successful sale and potentially securing better terms.
Disadvantages of buying before selling
While the advantages are considerable, it is important to consider the potential drawbacks as well.
Budget limitations
Depending on your circumstances, buying a new home before selling your current one may result in a constrained budget for your purchase. Without the funds from the sale of your property or sufficient resources, you may be restricted to a less ambitious acquisition than desired, compromising on your ideal property.
Financial risk
Purchasing a new home before selling your previous one exposes you to the financial burden of managing two mortgages or home loans simultaneously. This can place a significant strain on your finances and impact your ability to meet monthly payments for both properties.
To cover the costs of acquiring the new home and managing two properties concurrently, you may need additional financing options such as bridging loans or other forms of credit. These additional financial obligations can lead to increased costs and higher levels of indebtedness.
Increased psychological pressure affecting the sale
Buying a new home before selling can create stress and uncertainty regarding the sale of your previous property. If your current house doesn’t sell promptly, you may find yourself in the challenging situation of owning two homes for an extended period, leading to logistical complications and worries.
This psychological pressure can have negative implications for the sale of your previous property, particularly if you need to cover the financial costs associated with the purchase. It may weaken your position during negotiations and compel you to accept offers below the true value of your home.
Furthermore, the prolonged selling process may tempt you to lower the sale price to attract more buyers, reducing your potential profit and impacting your ability to maximize returns on your real estate investment.
Take into account your initial financial situation
It is essential to recognize that not everyone has the capability to buy before selling. Managing two properties requires sufficient resources and a strong financial position. However, there are several options to consider before buying a home.
Conditional offer to purchase
A conditional offer to purchase allows a potential buyer to propose the acquisition of a property, but with specific conditions, including the sale of their own property. Essentially, the buyer states that their commitment to buy is contingent on successfully selling their current property, meeting predetermined conditions such as sale price, deadlines, and other terms.
Including this condition in the offer protects the buyer from being left with two properties and excessive financial obligations if the sale of their existing property falls through. However, this condition may make the offer less appealing to the seller due to uncertainty regarding the finalization of the transaction. If you have a genuine interest in a particular house, this option may not be the most favorable for you.
Relay Financing
Relay financing, also known as bridging finance or a bridging loan, is a short-term property loan typically lasting around six months. It provides borrowers with quick access to funds for purchasing a new property while they await the sale of their current property. Essentially, it acts as a financial bridge, filling the gap between buying a new property and receiving the proceeds from the sale of the old one.
However, relay financing carries inherent risks. If the sale of the current property takes longer than expected, the borrower may encounter difficulties in repaying the bridging loan upon its maturity. Therefore, it is crucial to carefully assess your financial situation, plan ahead, and consider all aspects before opting for relay financing.
Guillaume Tremblay assists you in making informed real estate decisions
A realtor plays a crucial role in guiding you through the decision-making process. If you find yourself uncertain about the best course of action, it is highly recommended to leverage the experience and expertise of professionals whose job is dedicated to this field. Whether you are searching for a house for sale in Rawdon, Joliette, or the broader Lanaudière region, or if you are planning to sell your own property, we are here to provide assistance and support.
