[singlepic id=301 w=275 h=225 float=left]The age-old question, should I buy or first sell my home?
If you already own a home, one of the first decisions you’ll face when you prepare for a move to your next home will be whether to buy first or to sell your existing home prior to making a purchase. “There is no ‘right’ decision, but it’s important to know the potential consequences of both routes says Real Estate Council of Ontario Registrar Joseph Richer, ”Speaking with your registered real estate professional before starting the buying or selling process can help you decide which route is better suited to your circumstances.
Depending on market conditions, the type of home you wish to purchase and the popularity of the area, being able to buy first allows you to wait until the right home comes up for sale. In a heated market where you may encounter bidding wars, it can also be less stressful knowing that if you do not get the first home on which you make an offer, you have time to wait until another one that meets your criteria comes up for sale.
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However, market conditions can also impact the sale of your existing home. If you have already purchased a home and are unable to sell your existing one in a timely manner, you may face difficulties in securing a mortgage for the new home or may have to pay two mortgages for a period of time. Additionally, you may feel inclined to accept any offer that comes in, even if it’s lower than what you believe your home is worth.
By selling your existing home first, you will know how much money the sale has brought in. That will help determine how much you can afford to pay when you buy your next property. However, if you experience difficulties with finding a home to purchase, you may end up rushing the process and buying a home that isn’t ideal for you, or paying more than you planned for one that is.
If you decide to sell your existing home first, have a contingency plan should your dosing dates not align. This may involve staying with family or friends, finding a short-term rental or negotiating a longer closing period.
[singlepic id=302 w=275 h=200 float=left]One way of minimizing the risk in this scenario is to include a conditional-on-sale clause when buying your next home. That means your offer is conditional on the sale of your existing home, typically within a given timeframe.
As a buyer, including such a clause may be comforting, but some sellers may be reluctant to accept these types of offers due to the uncertainty of when the offer will become firm. For this reason, conditional-on-sale offers typically contain an escape clause for the seller, allowing them to cancel the offer under certain conditions.
If the seller does accept a conditional-on-sale offer, they can typically continue marketing their home to other prospective buyers until the original offer is firm. If they are successful in receiving another offer that they think is superior, they would have to let the original buyer have an opportunity to waive the conditional-on-sale clause and firm up the offer. If the buyer is unwilling to waive the condition, their offer is cancelled and the new superior offer can be accepted.
In a Seller’s market it will virtually be impossible to have a home owner agree to a conditional-on-sale offer due to the fact that more buyers competing for fewer homes tilts the scales in favour of the Seller and as such, less incentive for them to accept such an uncertain condition to an offer.
No matter which route you choose to go, it’s important to remember that a registered real estate professional is knowledgeable about market conditions and will offer advice and solutions to guide you through the process, says Richer. “They will be able to discuss various scenarios to make sure you have realistic expectations about what may happen and how to be ready should a setback arise.”
If you have any questions about the home-buying or home-selling process, feel free to contact me.
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Ilan Joseph is a Real Estate Broker with Sutton Group and is co-founder of a 10-person award-winning Toronto, Thornhill and Vaughan real estate team.
For over 10 years, Ilan has provided more than 1550 buyers and sellers valued advice and service, enabling them to reach their real estate goals.
He’s kind of like the Bruce Willis of real estate.