Buy First, then Sell? Or Vice Versa
Thursday Jun 16th, 2016
You are now in the grips of looking for a new home for any number of reasons. You have been transferred, you are expecting your first child or you are blending new families together.
So you will find yourself facing the eternal question of what to do first: Buy the new home, or sell the old one? This is a very tricky juggling of two mutually exclusive and independent events.
It would be great if you could simultaneously buy and sell together. Sometimes this is possible, but you need to make sure that you have chosen a good realtor who can help you both strategize and operationalize this outcome.
In a perfect world, you would hope to have an offer on your own home to consider at the same time that you are making an offer on your next home.
This is not practically feasible for most of us. Normally in a hot market, selling your home is not the problem; finding the next home to buy most definitely is. With shrinking inventories of homes for sale and the demand to buy being greater than the supply of homes for sale, clearly selling is not the problem, but buying is.
What are you to do to reduce your risk of being homeless or having to carry two homes at the same time? First, you must establish your home value and differential. How much is your home worth and what is your budget for your next home? Do you have your financing in place to bridge the gap and the possibility that you might have two homes to financially carry at the very same time?
The most cautious and safest advice is to put your home up for sale and start looking at the same time. If an offer comes in on your current home you can then accept it conditional upon finding suitable accommodations, as well as putting in a sliding closing or completion date which will allow you to both advance and/or delay the closing date by a range of, say, 90-120 days.
Of course you need a willing buyer to accept this condition, but this clearly reduces your risk of being homeless once your current residence has then sold firm. Sure, there are interim accommodation backstops like rentals, friends and family, but this is inconvenient to your family and there is the additional cost for the storage of your furniture and possessions.
You must determine the equity in your home as a start and if you are buying up do you have your financing in place for this move? Ask your bank if they will extend to you bridge financing in the circumstance that your home is sold but not yet closed and you have to close on your new home in advance for a period of 60-120 days for renovations and decorating.
This is a very common requirement of most second-time buyers who are moving homes.
Making an offer on your new home conditional on selling your current home is clearly a strategy to consider, but in a hot market with multiple offers and bidding wars most sellers do not need to take the risk on your conditional offer to purchase when they have unconditional offers to accept for their property. In situations where the seller will accept this kind of offer, they will want an escape clause of 24-72 hours to allow them to continue to offer their property for sale and if they get a bona fide offer they then can give you notice to go firm or walk away.
Contingency offers are generally not accepted because of the inherent uncertainty involved.
Buying and selling homes at the same time is twice the adventure and each situation has its own unique challenges. You have to be flexible and not fixate on the little things. Remember, your goal is to achieve a sale and a purchase at or near the same time
Selling your home while buying another is something you just can’t rush as it requires patience.
***Posting Taken from: Torontosun.com