Carrying two mortgages can be tough for buyers
One of the most common concerns people have when it comes to selling their existing home and buying a new one is which one to do first.
On the one hand, if you buy your next residence before selling your current one, you might be left holding two properties, and two mortgages. On the other hand, if you sell your home first, you might end up without a home at all. So what’s the best strategy? Here’s an insight.
Generally speaking, the safest way to go about your move is to sell your existing home first. The main reason for this is because at least this way your destiny is in your own hands. Imagine that Cheryl sells her existing home and is now looking to buy. Her worst-case scenario would be settling for a home that is less than perfect — she is still in control of her situation. Another advantage of selling your home first is there are no, or at least fewer, surprises. Sometimes, what you hope to get for your home and what the market will actually get you are two very different numbers.
I, myself, tend to lean toward the sell-first, buy-later strategy, mainly because I feel it’s a safer one for my friends and clients. However, being in the business myself and knowing what I know about the market, under the right circumstances I would not hesitate buying a new place first and selling afterwards, if it were my own home. The reason I feel differently here is simply because I know I wouldn’t lose sleep, slip into a panic or have an anxiety attack. Fact is, under the right circumstances there is no reason to feel nervous about buying first and selling after. The main reason I steer my friends and clients away from this method is because it only rarely offers any major advantages, and also because it’s unreasonable for me to expect them to be as secure with the business of real estate as I am
If Nick wants to undertake the task of buying first and selling later, he should be sure to follow a certain path. Normally, when you’re ready to buy your first home, your No. 1 step should be to sort out your financing. In Nick’s case, his first step is to hire a realtor who comes highly recommended from a trustworthy source even after the sale has closed, and have them evaluate his current home. If the realtor is one Nick can rely on, the estimate of the home’s value will be in the realistic to conservative range — or the worst-case scenario part of the spectrum. Nick needs to assume that he will get not a dollar more than this amount and then move forward, if he still feels comfortable doing so. Of course, the homes he looks at will likely depend on what his realtor determines is an achievable sale price for his existing residence.
Step No. 2 involves two simultaneous parts. On the buying side, Nick will be looking at potential homes to buy. On the selling side, Nick will be working his nights away to ensure that his home is absolutely 100 per cent ready to list at a moment’s notice — the notice being that he successfully finds a suitable replacement. It is important to understand, of course, the only reason Nick hasn’t put his house/condo up for sale already is because he’s not sure of what’s out there and whether or not he’ll find something worth the inconvenience of moving.
The final part of the plan kicks in if Nick finds a home he likes, puts in an offer and ends up closing the deal. At this point, within 24-48 hours his current home should pop up on the MLS. The home should be listed conservatively/practically, as previously discussed, and the home should show like a dream. Nick should also be prepared to make whatever sacrifices he needs to, to ensure that the home is available to show at all reasonable times.
Most important to understand here is the buy-first, sell-after strategy is not one I easily recommend, because of the reasons mentioned above. At times it is the only way to proceed — as in the case of Nick, who isn’t really sure if he’ll find something he likes enough to actually move. The point is this method can be successful with the proper planning. One other significant factor is the market in which your existing home falls. If you live in a downtown Toronto condo suite in a relatively newer, popular building, I’d say you are a prime candidate for the buy-first, sell-later strategy. If, however, you find yourself currently in a much older home in one of the GTA’s more modest, less booming areas, no matter how much planning you do, this strategy might not be a smart one.
In this case, as in the case of just about every real estate transaction, the only rule that always applies is that going in with no plan at all is a very frightening and eerie way to proceed. I’d like to wish you all a safe and happy Halloween!
