Are you looking to buy a home? Saving up for a down payment is tough enough in pricey real estate markets like Toronto and Vancouver, but if you’re already a homeowner and you’re buying and selling, you face a whole host of new challenges. Homeowners looking to move up in the market are faced with a difficult decision: should I buy first or sell first? It’s not always an easy decision and often comes down to your personal comfort level.
Buyers vs. Sellers Markets
Before deciding to buy or sell, it’s important to know the type of market you’re in. If you’re in a seller’s market like Toronto, where the number of buyers outnumber the number of sellers, then it often makes sense to buy first and sell after. But if you’re in a buyer’s market where the number of sellers outnumbers buyers, then it’s strongly recommended that you sell first.
In Toronto where there’s a chronic shortage of listings, detached houses are in high demand and sell fast. You should be ready to wait a while before successfully making an offer on a property. This is in contrast to a slower real estate market like Calgary, where as a buyer you have lots of choice as there are plenty of homes for sale. In a market like Calgary you have no idea how long it will take your home to sell, that’s why it’s a good idea to sell first and buy after.
Buying First, Selling After
Even in booming real estate markets like Toronto, some people are still uncomfortable with the idea of buying a home first and decide to sell first. Unless you’re ready to move in with the in-laws or put your belongings in storage and rent, you could find yourself in a race against time when you decide to sell first. You may end up settling for a home that’s anything but your dream home or overpaying for a home out of desperation. Not only does this cause financial stress, it can cause emotional stress.
Before deciding to buy or sell first, consider how attractive your home is to potential buyers. If your home is harder to sell – it has a unique design or layout or is a luxury condo, for instance – it may remain on the market longer, even in booming real estate markets.
If you decide to go with conventional wisdom in a seller’s market and buy first and sell later, to protect yourself from carrying two homes, it’s a good idea stretch out your closing day. As long as it doesn’t put the deal in jeopardy, try to push the closing date of the home you’re selling to 60, 90 or even 120 days. This will give you plenty of time, should you run into any unanticipated issues selling your home. You could also get a bridge mortgage for short period that will help bridge the gap for the period where you have to buy your new home and before selling your old home.
Make Hay While the Sun Shines
While you’re house hunting and you haven’t sold your home yet, take advantage of this time to get your home ready for sale. Take care of renovations and repairs like decluttering, re-facing cabinets and painting. That way your home will be ready to put on the market right away once you successfully make an offer on a home and you won’t be left scrambling.
Nevertheless, buying first and selling after can be nerve-racking. What if your house doesn’t sell for as much as you’d hoped? To protect yourself, don’t buy a home at the very top of your budget assuming your home sells for top dollar. Budget the absolute lowest price your home could sell for in a worst-case scenario. That way you won’t be left scrambling at the eleventh hour if things don’t go according to plan.
Everyone’s financial situation is different. There are creative ways to get around the conundrum you may be experiencing. Do you need some help deciding whether it makes sense to buy or sell first? Do you have mortgage financing needs? Let us help you run the numbers, we have a team of experts who can help you make the right decision. Feel free to contact our office today.
