Sell or buy first? Which option is right for you?

June 13, 2017 No Comments

Sell or buy first? Which option is right for you?


Posted by admin in Agency Blog, Making The Next Move

It’s the ultimate dilemma for any home owner planning to move on to a new property – do I sell or buy first? You don’t want to sell unless you have somewhere else to live, but you don’t want to buy unless you have the money from the original home. Whichever way you go, there will be some stress involved, so it’s important to look at the pros and cons of each option to decide which is the most suitable and practical for your circumstances.

Questions to consider

Your decision should be based on your current equity situation and how fast you can sell your current home. In a “hot” market, a “hot” property is sure to sell fast – but don’t assume that your property will attract an immediate buyer. Do your research so you have a realistic idea of the potential selling time. The other factor to consider is how long it will take you to find your next home. You don’t want to be left homeless and in limbo while you search for the perfect property.

Of course you can only estimate how long it will take to sell your home and find a new place to live. Whatever the market is like, the process can be much quicker – or slower – than you anticipate. So you also need to consider what kind of back-up support you have in place. For example, could your family give you a place to stay while you are between houses? Or could they lend you enough money to make an offer on the perfect house before your current home is sold?

Your financial status

Generally speaking, selling first is a suitable option if you have little to no equity, or if the property will take some time to sell, either because the market is slow or because the property is unusual and will only attract a niche market. This way, you are not caught in the situation of having two mortgages, and you can purchase your next home with an established budget based on the sale of your last home.

If you have significant equity in the current home combined with a healthy income, you can afford to balance your payments if you buy first.

Simultaneous settlement

If you are very lucky and well-organised, you can achieve the ideal – a simultaneous settlement. This is when the sale of your previous home and the purchase of your new home are processed simultaneously. So the money from your sale is instantly transferred into the purchase of your next home.

One way to achieve this is by selling your home with a long settlement period of up to six months. This gives you time to look for a new property, knowing that the payment from your previous home is available for the purchase. You can include a clause allowing for the settlement to be brought forward in the event you find a home within that time frame.

You can also purchase a new home with a long settlement period, giving you extra time to sell your current home. However, this is more risky because if you fail to sell your home within the specified period, you could potentially lose your deposit on the new house.

Problems can develop on the day of simultaneous settlement if one of the settlements is delayed for some unforeseen reason, which could result in the entire move being rescheduled for a few days later. This in turn can trigger other challenges such as additional expenses in penalty interest. If the delay drags out, you may risk losing your deposit.

Buying first with a guarantor loan

If you have plenty of equity in your current home, but you are not sure how long it will take to sell, you may consider the option of a guarantor loan. This will involve a friend or family member (usually your parents) putting up their home or investment property as additional security for your loan. Once you sell your home, you can pay off your debt to the guarantor, so they are no longer providing security for the loan.

Buying first with a bridging loan

If you owe approximately 60% or less of the value of your current home, you may have sufficient equity to apply for a bridging loan. A bridging loan covers the cost of purchasing a new home and maintaining the two properties until you have sold your current home. You need to prove that you have sufficient equity to cover the loan once your property is sold.

This is generally a good option for a home owner who is downsizing, such as a pensioner, as the new home will be of considerably less value than the current home. As a bridging loan incurs a significant amount of interest, it is not a good option for anyone buying a more valuable property than the one they are selling, as the interest could become unmanageable.

Agency Blog Preparing to Sell

When is the best time to sell?

Lifestyle changes are often the reason behind our decision to sell. Whether you are relocating, have a growing family or...
Read More
When is the best time to sell?
Agency Blog

Could you sell your own home?

When you calculate that your real estate agent’s commission is around 2-3% of the sales price plus GST, you can...
Read More
Could you sell your own home?
Agency Blog

Buyers Beware

Don't make these mistakes! The rules of real estate are always changing. On the one hand, affordability is hovering at...
Read More
Buyers Beware
Agency Blog

Top Tips for Finding a Trustworthy Real Estate Agent

Your real estate investments are arguably the most important investments of your life – both financially and personally. You are...
Read More
Top Tips for Finding a Trustworthy Real Estate Agent
Agency Blog

How to choose the right property for you

Your home is perhaps the biggest investment of your life – particularly as it is not just a financial investment,...
Read More
How to choose the right property for you
Agency Blog

Why you need a property inspection

Whether you are purchasing a new home or an investment property, you are about to embark on one of the...
Read More
Why you need a property inspection
Agency Blog

How to ensure your renovation will increase your house value

There are two main benefits to renovating your property – firstly, you can make it more comfortable and compatible for...
Read More
How to ensure your renovation will increase your house value
Agency Blog

Upgrading Your Home Before Selling?

Most people have walked through beautiful model homes and wished their own home had all those modern features. Model homes...
Read More
Upgrading Your Home Before Selling?
Agency Blog Preparing to Sell

5 features that rarely add value when you sell

There’s a rule of thumb when renovating that you should aim to add three dollars back from every dollar you...
Read More
5 features that rarely add value when you sell
Agency Blog Preparing to Sell

Tips for valuing your property

As a vendor, you want to get the highest possible price for your property. However, setting an unrealistic price will...
Read More
Tips for valuing your property
Agency Blog Preparing to Sell

Auction or Asking Price? Your sale options

There’s more than one way to sell your property – and you may have a preference of how you’d like...
Read More
Auction or Asking Price? Your sale options
Agency Blog Preparing to Sell

11 key steps to selling your property

Selling a home isn’t quite as simple as sticking up a ‘for sale’ sign and waiting for the buyers to...
Read More
11 key steps to selling your property
Agency Blog

What is a Home Stager and Do I Need One?

So you’ve decide to sell your home. Sitting down in your living room and looking around you see the evidence...
Read More
What is a Home Stager and Do I Need One?
Agency Blog

10 Ways to Prepare your Home for a Spring Sale

Spring selling season is just around the corner and it’s certainly not too early to be giving it some thought if...
Read More
10 Ways to Prepare your Home for a Spring Sale
Agency Blog

Reasons A Home Doesn’t Sell

One of the most common questions in real estate is “why is that home on the market for so long?”...
Read More
Reasons A Home Doesn’t Sell
Agency Blog

Prevent A Nasty Property Surprise

[Educational Blog Status Update]: HOMEBUYERS and real estate investors are being warned to watch out for the hidden traps that...
Read More
Prevent A Nasty Property Surprise
Agency Blog

First Home Buyer Cheat Sheet: 10 Tips To Buying Your First Home

So you’re going to take the plunge into real estate ownership. Congratulations! You’ve just made a smart decision in securing...
Read More
First Home Buyer Cheat Sheet: 10 Tips To Buying Your First Home
Agency Blog Presenting your Property

Ten staging tips to sell your home faster

One of the key tasks in selling your home is to make it appealing and memorable to potential buyers when...
Read More
Ten staging tips to sell your home faster
Agency Blog Preparing to Sell

Quick tips for working out a property’s market value

When you are searching for the perfect property, it can be challenging to work out exactly how much you should...
Read More
Quick tips for working out a property’s market value
Agency Blog Making The Next Move

How to narrow down what you want in a home

Before you can find the perfect home, you need to know exactly what you are looking for – and as...
Read More
How to narrow down what you want in a home
{"slides_column":"1","slides_scroll":"1","dots":"true","arrows":"true","autoplay":"true","autoplay_interval":"2000","speed":"300"}

PREMIERRE GROUP PTY LTD | Copyright 2014