If you will be buying and selling in your next move you will have to decide whether to put your current home on the market first, or go out looking for a home first. In the ideal world, both things happen at once…. But in reality you will be fortunate not to have a mis-match of timing as you try to buy and sell.
The one thing to keep in mind is that any offer you want to make on your next home will not be accepted if you haven’t sold your own property unless you can ‘chain-break’ by buying without selling.
The advantages of selling before you buy
Selling before you buy can put you in a strong negotiating position. Because you’re under no obligation to make a quick sale, there’s no pressure to accept a cut-price offer – you may even end up with a better price if you find a buyer who’s keen to move in quickly.
There are further benefits when you’re ready to buy. You’ll potentially have pocketed the cash from the sale of your previous property (or arranged a pre-approved mortgage), which could give you an advantage over other potential buyers. There’s a good chance the current owner would prefer selling to you, a cash buyer, than accept an offer that’s contingent on another property being sold. Not only does this make it much less likely that you’ll be gazumped, but it could also help you to get a lower offer accepted if the seller is looking for a fast turnaround.
Additionally, you’ll have the clearest possible view of your own budget. Because you’re not dependent on achieving a set price for your current property, you’ll know exactly how much you can spend on a new house.
What are the risks of selling before you buy?
Of course, this strategy also has its potential downsides. For any number of reasons, it may not be possible for you to buy a new house soon after selling yours. You might not find a property that you like, or the existing owner may be holding out for a higher offer. This means you’ll need to live somewhere else in the interim – either renting or staying in a hotel – which can take its toll over time, both financially and emotionally. You’ll also have to go through the process of moving house an additional time, with all the frustrations that this can entail (not to mention the costs of hiring a removal company, paying for an end-of-tenancy cleaner, reconnecting utilities, etc.).
The advantages of buying before your current house is sold
Perhaps the biggest benefit of this approach is that it eradicates the potentially irksome interim period between selling your old house and moving into the new one. The new property is already yours, ready and waiting for you to move in at your leisure. This is particularly advantageous to homeowners with young families; the thought of moving house twice in a short amount of time, with young children in tow, could persuade you that buying before you sell is the best option.
Furthermore, if you’ve already found your dream home at the perfect price, this approach guarantees that you won’t miss out.
What are the risks of buying before you sell?
Unsurprisingly, the biggest problem with buying before you sell is that you’ll need the financial capability to do so. Relying on bridging finance effectively leaves you encumbered with a loan over two properties until your existing house sells, this can be expensive.
Assuming that you have sufficient capital to buy without relying on additional lending, there are some other noteworthy risks to bear in mind. Perhaps the biggest is that the pressure of securing a fast sale may convince you to accept a lower-than-wanted offer on your previous property. It also leaves you particularly susceptible to unforeseen fluctuations in the housing market; if the market is slow, it may take more time than anticipated to sell your original house.
Talk to us… we can help with these decisions and assist by giving you an idea of what your current home is worth.