It’s the million-dollar question: Should I sell my current home before buying a new one? There are many factors to consider when choosing to buy and sell your home in one fell swoop. While there are risks and challenges involved, as with many processes, your greatest success rate often comes down to being prepared.
One of the most important factors that you need to consider is your financial position, assessing whether a simultaneous purchase and sale is even feasible. Owning two properties at the same time is obviously the safest option, but not terribly realistic for most. Knowing what you can afford, taking inventory of the equity in your current home, and investigating the types of loan products available is a good first step.
For most people, the money from the sale of their current home is needed to purchase their new home. If this is the case for you, there are a few options we can discuss to determine your best option.
One popular option is a bridge loan. As the name suggests, this type of financing acts as a bridge between the two homes. In order to qualify for this type of loan, you’ll need a sale agreement with subjects removed on your existing home and confirmation of the equity built up in your home. This is a short-term loan, usually lasting no more than six months. It can be an attractive option as it allows you to sell your existing home and buy a new one without restrictions or contingencies.
Another key area to evaluate is the local housing market. This will help you determine the length of time it may take to buy one house and sell the other, based on markets being favourable to either buyers or sellers (eg, in a buyer’s market, it will be easier to buy a new home and vice versa in a seller’s market).
By assessing how quickly homes are selling and for how much, you’ll gain a better perspective of your potential timelines and determine the price you can expect to not only get, but also to pay. Before you start seriously searching for a new home, or put your current home on the market, make sure you have a comprehensive understanding of both housing markets.
For obvious reasons, timing plays a crucial role when buying and selling simultaneously. While the two homes will rarely ever close on the exact same day, there are factors to consider to help ensure they’re as near together as possible. It can take a few days for your lender to transfer the funds, so ask for closings to take place early in the week and early in the morning, and aim for closings within two or three days of each other. In order to secure your preferred closing dates and times, you may want to consider offering some flexibility in other areas of your contract to offset the request.
As with any real estate transaction, you want to work with a team of qualified professionals. For example, your appraiser will help determine your home’s resale value, your real estate agent will help with timing and the negotiation process (if possible, you should try and work with the same real estate agent for both transactions) and your mortgage broker will assist with the loan and mortgage process for both homes.
There’s no doubt that the risks associated with buying and selling simultaneously are inherently higher than when completed separately. If anything goes wrong, both transactions could be seriously affected. By anticipating the potential risks and planning accordingly, you can alleviate some of the stress and make the synchronicity a reality.
Have questions about buying and selling at the same time? Answers are a call or email away.
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