So many people come to us and ask ‘can I buy another house before I sell mine?’ Well, there is one fundamental rule that I apply when deciding if you can buy before you sell. But, before we get to that rule, there’s two things you need to find out first.
The first thing you have to do is find out whether you can get finance to cover you for owning two properties for any period of time. It might be that you get bridging finance for six months and you’ve got all that time to sell your home, or it might be that they say no, they won’t extend that sort of credit to you. If they say no then it’s not an option, you can’t buy before you sell. But if they say yes, there’s another thing you have to find out first. That is, you need to have a realistic understanding of what your current house is worth.
I can’t stress this enough: don’t go out shopping and looking for a new home unless you’re working on worse-case scenario. You do not want to get caught out. Assuming that you can get bridging finance and you have a really clear idea about what your place is worth then you can go out looking for another home. And I mentioned that rule earlier: the fundamental rule is that you do what is hardest first. What that means is that if it’s going to be harder to sell your home than it is going to be to buy then you need to sell first. If it’s going to be harder to find the right property and buy it in a very competitive market for instance, then you need to find your next home before you sell. So that’s the fundamental rule, but let me give you a couple of examples of how that plays out.
Market conditions play a very big part in this, so you need to understand that. In a buyer’s market, you’re going to find it harder to sell than you will to buy, so it stands to reason that choosing to sell first is probably going to be the best plan. By selling first, you’ll know precisely how much you’ve got to spend when you go out looking for your new home. By selling first you will know how much how you’ve got to spend and you’ll also be able to turn that to an advantage when you’re bidding against other buyers who may not have sold.
When it’s a seller’s market, on the other hand, you’re going to find it easier to sell than it will be to buy and finding the right property and competing for it becomes really tough. So, it stands to reason under these circumstances that you want to buy before you sell. If you sell first and you don’t buy it quickly you run the risk of being out of the market while prices are rising and that can be quite dangerous. I’ve actually met people who were not able to even buy their own home back because they took too long to get back into the market. But the flip side of that is you don’t want to make a panic purchase. City and regional markets perform very, very differently so getting the timing wrong can have a significant impact on your financial position.
Lastly, you need to consider whether you’re buying and selling in the same market. For instance, you might be moving interstate or maybe doing a sea change or a tree change in which case you might be selling out of a really buoyant market into slower market, or the other way around.
So, when you ask can I buy another house before I sell mine? Well, you need to really carefully consider the ways in which those markets are behaving to get your timing right, because that will make the difference to your financial position.
Published 15 May, 2018.
DISCLAIMER: Good Deeds blogs/buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.