Your family is growing and you need a home that can grow with you. So, as you start thinking about your impending move, you’re left with the lingering question “should I buy first or sell first?”
“While there is no ‘right’ answer, it’s important to know the potential pros and cons of both options,” says RECO Registrar Joseph Richer. “Regardless of whether you buy first or sell first, it’s a good idea to have a contingency plan in case your closing dates don’t align, leaving you with two homes, or no home, for a period of time.”
Speaking with your registered real estate professional before starting the buying or selling process can help you decide which route is better suited to your family’s needs.
Buying first can make the house hunting experience more enjoyable. Without a closing date looming on your existing home, you’ll have time to wait until the right home comes up for sale. It can also be less stressful knowing that if your offer is unsuccessful, you can wait for the next opportunity to come up.
The downside to buying first is if you are unable to sell your home fast enough, you will find yourself owning two homes at once. The result could mean paying two mortgages at the same time, not to mention all the other costs of home ownership. Additionally, you may have trouble securing a mortgage for the new home.
As a buyer with an existing home to sell, you can protect yourself by making your offer conditional on the sale of your current home. That means if you’re unable to sell within a specified period of time, you’re able to back out of the transaction. However, it’s worth pointing out that this condition will likely make your offer less attractive to the seller, especially if you’re buying in an area with a hot market.
The biggest benefit of selling first, aside from removing the risk of owning two homes at once, is you’ll know how much money the sale brought in, which will help determine how much you can afford to pay for the next place.
As helpful as that is to know, the challenge is that you’ll find yourself in a race against the clock, with your closing date looming and potentially no home to move into when you move out of your current one. If you’re not careful, you may end up rushing the buying process and settling for a home that isn’t ideal for you, or paying more than you planned because you feel pressured.
Have a contingency plan
Regardless of which route you choose, it’s a smart idea to have a back-up plan in place in case you are left with two homes, or no home, for a period of time.
If the sale of your home closes first, you might consider a short-term rental or moving in with family or friends. This could be better than settling for a less-than-ideal home because you are rushed.
If the purchase of your new home closes first, you might need something called “bridge financing” to cover the down payment and other closing costs until the sale of your current home closes.
“No matter which option you choose, it’s important to remember that a registered real estate professional is knowledgeable about market conditions and will offer advice and solutions to guide you through the process,” says Richer. “They will be able to discuss various scenarios to make sure you have realistic expectations about what may happen and help you come up with a plan that works for you and your growing family.”
There’s a lot of information out there about market trends and how to get the best price, but you also need to know about your rights and responsibilities as a home buyer or seller. The Real Estate Council of Ontario (RECO) can help you with that.
When it comes to real estate transactions, the more you know, the better you’re protected. Visit RECO’s website to learn more.
Check out some more helpful articles including 4 must-do tips before you start the home buying process, as well as the 5 questions you should ask before selecting a real estate representative.