Should I sell my house before purchasing another home – the ‘benefits and disadvantages?

The short answer is….” it’s up to you”. There are benefits and disadvantages to selling your house before purchasing a property, or alternatively there are benefits and disadvantages to waiting until you find a property before putting your house on the market.

It is advisable that whenever you are faced with such a conundrum, your first call is to discuss your situation with your solicitor. Armed with information, you can then meet with your Real Estate Agent and form a plan to achieve the best outcome for you.

Typically, when home owners place their house on the market, and they have not purchased, they include a clause in the Sale and Purchase Agreement stating:

…. this offer [on the property] is subject to the owner finding another house within a stated period of time.

Should you not find a house in the stated timeframe, then the Sale and Purchase Agreement on your property is at an end.

I have found this decision to be an absolute conundrum for many homeowners, and what I do know, is that you need a highly skilled and motivated Real Estate Agent to assist you to navigate this path and help you to find a new home. It’s not easy no matter your decision, and I have walked this path with many homeowners.

Let me explain some of the benefits of selling your house prior to purchasing and alternatively the disadvantages to you.

When you sell your property first

Benefits:

• You become favorable to the owner of the home you wish to purchase. This is because when making an offer, the seller of the property, you wish to purchase, has confidence that the conditions in your agreement are likely to progress with no problems. Your offer gives the seller a higher probability of a guaranteed sale.
• You know exactly how much you have to spend on another home.
• You can have confidence that when you see a home you like, that your chances of getting the new property increases when you have an offer on your own property.
• You can plan your future.
• You have timed bringing your property to market to fit with market demand which might just give you a greater price than if you wait.

Disadvantages:

• You may have a set period of time to find a property before the offer on your house expires. This timeframe can put you under some pressure.
• If you don’t find a property and you dismiss the offer on your property, it means that you will need to come back to the market for a second time.
• Should the sale on your house fail you will incur costs with your solicitor who would have handled the Sale and Purchase Agreement on your property.
• A lot of buyers don’t particularly like the clause where the landowner is to find another home. This can reduce the number of people wanting to purchase your property.
• Out of desperation, you might purchase a home that doesn’t meet your needs.
• When you find a property first and then put your house on the market.

Benefits:

• You have the security of knowing exactly where you are going.
• You feel more secure and less stressed in the knowledge that you are in control of your destiny.
• You know exactly how much money you need to sell your property to ensure you get your new home.

Disadvantages:

• In this competitive market, it is less likely that your Sale and Purchase offer on a property you are trying to purchase will be accepted by the owner of that property. This is because your offer gives them no security of your ability to confirm the sale, and furthermore because you need to sell you could protract the period of time to sell for an owner.
• You could be making multiple offers, costing you money with solicitors and building reports to name just two costs. These costs can add up and at the end of it you may not have another home.
• You find your perfect property and your offer is not accepted because there are other offers more aligned to a ‘cash offer’. A cash offer is often highly appealing to a seller.

Key points:

The market is highly competitive right now.
Your offer is less likely to be accepted if you haven’t got your house on the market or sold ahead of making an offer on another home.
You need a highly skilled and motivated Real Estate Agent to manage the process of selling your property at the greatest price, and who is motivated to help you find another home to purchase. This agent also needs to manage the interest of the buyer so that should you require any extensions to the Agreement between you and the buyer, they will willingly cooperate ensuring you actually do sell.

As you can see there are benefits and disadvantages to selling first or selling later. Right now there are few listings on the market so buyers are happier to wait until you find a new home. I also work with many Aucklanders who are happy to wait as they have accommodation still in Auckland.

In my experience, there are 3 ways that I can make this journey easier.

I can place your property on the open market. My aim is to create market competition to achieve you the greatest price in the shortest timeframe. As soon as you place your property on the market, I immediately move to assist you to find a property to purchase. In conjunction with you, I scout for your future home. When you find a home to purchase, I give you information so that you can make a judgement on what the potential sale price of that property actually is. I help you to structure an offer on the home you wish to purchase so that you may be the winning offer. I support you at an Auction. I support you with recommendations to highly experienced Trades People wo will undertake building reports and guide you concerning the home you are trying to purchase.
I can place your property on the market and sell directly to the buyers that my colleagues and I have on our databases. The disadvantage of this is that you will typically not achieve the greatest sales price in contrast to going out to the market where you create the greatest competition.
I can put you in touch with a Mortgage Broker who will advise you on bridging finances. This means that you can purchase first, then sell your property. Bridging finance is not always an option. Be very aware that banks are reluctant to bridge unless there is sufficient income and even then this option is not guaranteed.

I am highly empathetic to the stress that selling and buying of a new home places upon my clients. I am committed and I walk this journey with my clients on a regular basis.

If you are in this conundrum, give me a call to discuss a plan that fits with your needs.

Disclaimer - This is a opinion piece written by Linda, and is not the opinion of Ray White.