I’m thinking it’s time to upsize to a bigger home. Is it a better idea to buy the new home before I sell my current place, or vice-versa?
The short answer to your question is that there are pros and cons for each strategy. You should make your decision only after you have thought carefully about your needs, financial status and tolerance for risk and asked your real estate salesperson for their informed opinion about local market conditions.
The ideal situation for most consumers is to buy and sell simultaneously — so the closing dates align — but that scenario isn’t always possible, especially when the person buying your home is trying to align their own closing dates.
What are those pros and cons? When you buy your new home before you sell your current residence, time is on your side during the home search. You can carefully consider the dwelling type and ownership model that best fits your lifestyle, and then visit as many available properties in your preferred neighbourhoods as possible. That’s a strong argument in favour of buying first.
If your finances are tight, buying first can be risky. You’ll have to find the money to provide a deposit, which could be difficult if your net worth is tied up in your current home. Even if you have the financial capacity to make an offer, you could wind up owning two properties for some time; imagine paying two mortgages, as well as other expenses such as property taxes, utilities and home insurance.
If you can’t afford to maintain two homes, you may wish to consider selling your current home before you make an offer on your next property. When you sell first, you can afford to be selective about the offers that come your way. You’ll also have a much better idea of what you can afford to buy.
The big problem with the sell-first strategy is that once you accept the buyer’s offer the clock starts ticking towards the inevitable closing date and you’ll need to find somewhere to live. If you’re unable to find a home that fits your lifestyle, you may feel pressured into buying a property that doesn’t entirely meet your needs or renting a temporary home and storage lockers in the interim.
Should you determine that you can’t align your buying and selling closing dates and you aren’t sure about your next steps, talk to your salesperson. They should be able to give you a good idea of how long it might take to sell your home based on the current market conditions (bearing in mind there are no guarantees on when you will sell your home or how much you will get for it) and help you set a realistic-but-attractive listing price. They could also attempt to negotiate a longer closing date to provide you with more time.
If you have a question for Joe about the home buying or selling process, please email firstname.lastname@example.org.
Joe Richer is registrar of the Real Estate Council of Ontario (RECO) and contributor for the Star. Follow him on Twitter: @RECOhelps