Updated: Mar 7, 2022
Currently, in a seller’s market, buying first may be a good strategy. But first consider all financial, legal and personal responsibilities, writes Joe Richer.
By Joe RicherRegistrar, Real Estate Council of Ontario
Fri., March 4, 2022
Is it better to buy my next home before I sell my current one, or vice-versa?
While it may be comforting to have someone buy your home before you search for another, it can also create some stress knowing that you need to find another place to live before you must leave the one you sold.
Conversely, if you purchase first, you may feel increased pressure to sell your current home as soon as you can or risk owning two for a while.
An ideal scenario that many homeowners seek is to sell their home, buy another and move out of one into the other on the same day. However, that may not be possible if the person on the other end of either of those transactions can’t accommodate your preferred closing date.
That could leave you needing to move out of your home and finding somewhere else to live until you take possession of your new place — or owning two places until the buyers of your home take possession.
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.
Let’s talk about the “buy first” strategy.
It is possible that you could end up owning two properties for a time. That could mean paying two mortgages as well as two sets of property taxes, utilities, home insurance and other expenses. That is why it is important to ensure that you can afford to do so.
While buying your new home before you sell your current one can give you more time to do a careful search to find a place that best fits your lifestyle, be mindful that the clock is ticking. I recommend getting the closing dates for both properties — your next home and the one you sold — to be as close as possible. However, with limited inventory in the current real estate market, it could take some time to secure your next place.
When my spouse and I bought our current home, we spent several months looking. Our agent was very patient and showed us many homes until we found the right one.
If owning two properties is beyond your tolerance for financial risk — even if you can afford bridge financing — you should consider selling your current home first before making an offer on your next. In a seller’s market, you might entertain several offers and choose the one best for you. Selling first also confirms what you can then afford to buy.
However, the “sell first” strategy also has disadvantages and, in a seller’s market, may not be for the faint of heart. Once you accept an offer, you are on the clock to buy another place with a possession date that aligns with the closing date of the one you’ve already sold. 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.
Whichever strategy you choose, your real estate salesperson is a good resource. Armed with an understanding of the current real estate market, your needs and risk tolerance, they can help you make a plan.
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