Should You Buy or Sell First?

Should you buy or sell first? It’s the home mover’s dilemma; to sell your current property before buying a new one, or vice versa? In this post I will list the pros and cons of each, and provide some tips to make the process as stress free as possible for you. Everyone is different; there isn’t a right or wrong answer. What’s right for you will depend on a number of factors including market statistics, budget, finances, and element of risk. 

Let’s start with a quick look at the market. It’s changing. Canadian estate is predicted to see the largest price correction in over 50 years. This is triggered by inflation driving rates higher and reducing home sales. This results in higher inventories starting to appear. This should be a welcome relief for new homeowners who have perhaps struggled to get on the property ladder due to the financial burden. But it may also mean that current homeowners can ‘upgrade’.

With all this change expected to unfold over the next 12 months, it brings our question right to the front of the conversation. Should you buy or sell first? Here are some things that will help you move closer to your decision.

BUYING A NEW HOME BEFORE SELLING

Buying your next home first before selling has become a very popular option for many homeowners for a number of reasons. Oftentimes it’s the fear that the right house may not be available, or that they won’t find the right neighbourhood to live in. If this resonates with you then you might want to consider buying before selling.

Pros of buying first

• It can make the house hunting process more enjoyable as you’ll be able to take the time to truly find ‘the one’. When you have more time to house hunt, you can feel better about your decision and not have any regrets about the house you purchase.
• If you plan on buying a fixer-upper, buying before selling can also be a good idea. This allows you to live in your current home as you fix up your new home. Painting, replacing floors, and similar projects are much easier to complete in an empty home.

Cons of buying first

• Figuring out financing can be a huge stressor as you could end up owning two properties for a time. That means paying two mortgages as well as two sets of property taxes, utilities, home insurance and other expenses. There are ways around it, like bridge financing, or you can rent out your previous home, but then you have the additional responsibility of being a landlord.

SELLING YOUR HOME BEFORE BUYING

Selling your home first is a safer, more conservative approach and if you are tight financially then this is likely the best route for you.

Pros of selling first

• Selling your old home before you buy your new home gives you cash in the bank. This means you’ll have funds available for a decent down payment and you won’t run the risk of having to pay two mortgages.
• When you’ve already sold your first home, you’ll have a clear idea of how much money you have to spend on your new home. And, without the pressure to sell quickly, you can make sure you’re getting a great price when you sell.
• With one deal behind you, you can focus on what lies ahead. Not having to worry about moving funds around, or paying two mortgages simultaneously, makes the path from moving from your current home to your new home much smoother.

Cons for selling first

• You may find yourself feeling pressure to settle on a property that doesn’t entirely meet your needs or be forced to find alternative accommodation for a bit. The risk of having to discount your home for the sake of a quick sale is not a desirable outcome.

IN SUMMARY

The path up the property ladder is different for everyone, and in Canada’s evolving real estate markets, both buying and selling a home are very personal decisions. Both strategies have advantages and disadvantages, and you should only decide which way to go after you’ve thought carefully about what you’re looking for in a home, the current marketplace, your financial status and your tolerance for risk.

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