realtylinkonline

October 2002

Should you buy or sell first?

One of the trickiest balancing acts in real estate is trying to buy a new home while selling your current home. It's tempting to find your future home first, make an offer subject to the sale of your current home, and then get ready to sell.

Buyers tend to feel more secure going that route, because they know where they're moving to and how much it costs. But buying first can cause pressure if you know you have to sell your existing home quickly. You're in a much stronger bargaining position when you sell first.

A case study highlights the potential problems. The Johnsons want to move up from a condominium to a townhome. They find their dream townhome and make a subject-to-sale offer. Then, their REALTOR® lists the condominium. Ideally, it sells quickly and the closing dates on both transactions coincide. Unfortunately, this doesn't always happen.

What can happen is, the sellers of the dream townhome get another offer without a subject-to-sale, bump the Johnson's offer and give them 24 hours to remove the subject. If the Johnsons go ahead, they may end up having to close on the new home without having sold their current home. If they don't have the funds to support two mortgages temporarily, they may have to sell their condominium quickly, taking the first offer they receive.

Some REALTORS® may advise clients to sell first. This is because if you find a home you like first, you end up rushing your home onto the market and may not always get the best possible value for it. Buyers and their agents will know you're in a hurry to sell, and you may be tempted under pressure to accept a lower offer. And because subject-to-sale deals can be bumped, you can easily lose the home you wanted anyway.

Your REALTOR® can help you avoid this situation by showing you have to take an organized approach to buying and selling. You can begin this process by meeting with your REALTOR® to determine how much your current home is worth. If you're planning to move to a more expensive home, meet with your mortgage representative to determine exactly what you can afford. Get to know the neighbourhood where you want to live and have your REALTOR® keep you informed as soon as properties come on the market.

In the meantime, your REALTOR® will also focus on getting your home sold for the best possible price. Some REALTORS® may recommend you avoid house-hunting altogether while selling, because it's too easy to fall in love with another home and end up in a high pressure subject-to-sale scenario. Selling first removes the emotion from the equation.

After you accept a good offer on your current home, try to postpone the closing date so you'll have time for home hunting. Another option is to include a rent-back clause in the contract, allowing you to lease your home from the new owners for a short time. The buyers may not agree, but it's worth asking. If you don't find your dream home within a few months, you may need to rent while you continue searching. It may not be ideal, but it means taking the time to find a home that suits you just right.

In the end, it's all up to you. Will you sell first or buy first?