Selling your home? Looking for something smaller, more practical for your retirement? A common question most real-estate agents receive is, “should I buy first and sell later or the other way around?”.
Believe it or not, the answer is both are correct.
Experts suggest considering both personal and non-personal elements when making this decision. Your financial situation could be a deciding factor, just as much as the local market environment.
Yet, without creating too much confusion in an already stressful situation, there are three cardinal considerations to make when changing homes.
Very few people have the financial capacity to purchase a home with cash, which means that they will need to take a loan from the bank. What this means is that most buyers will require the equity they have built up in their current property to help them purchase another home. This scenario leaves buyers with little choice but to sell first and then buy.
There is the option of selling the property and then negotiating with the new owners to rent the property back until you find a new place. However, the success of this option will depend on how eager the new owner is to move into their new home, and you will be required to pay occupational rent. Not ideal, but another option is to move into temporary accommodation with family members or friends or a short-term rental. In this instance, storage facilities may also become a necessity. While having the equity readily available is an advantage, a temporary living arrangement could push you into making a faster decision than you should. Purchasing a property should never be a rushed decision. It should be given the time and deliberation it deserves.
If you would like an advance on your home equity, there is the option of having the money bridged before the sales transaction is concluded. The bridging finance amount will be based on the equity available on the property, your credit record and the expected cash inflow.
If you are in the rare position of not needing the equity from your current home, you still run the risk of being stuck with two properties. While this could be fine as a short-term solution, it may not work on a long-term basis. In this instance, you will need to have a contingency plan in place.
The local market
Although there are general overarching factors that will impact the property as a whole, most micro markets will be affected by unique circumstances that only pertain to that area. Aspects such as the type of home, price range and availability of other similar homes in the area will all have an impact of the sale of the property. A real estate professional will be a valuable source of information when it comes to researching the specific factors that influence the property market in a particular area. The agent will be able to provide you with insight into how long homes take to sell on average, and how much they are selling for. Finding this information out will help to gauge time frames and possible equity expected from the sale.
Risk and emotion
Whether you sell or buy first, each option has an element of risk involved. So ask yourself, is it better to sell first and possibly not have accommodation to go to, or buy first and have two bonds to pay until the one home is sold. There will be emotional aspects that will pull you in both directions, however, ultimately the answers should be based on the financial options available and the local market conditions.