Buy or Sell first?

It depends!

It very much depends on your personal preference, what type of home you are selling, and the type of home you’re buying, and the kind of market you find yourselves in.

From a financial point of view, there is no doubt selling first does make the most sense. But, it’s often a hard thing to do, to put your home up for sale before having found your new home. Also if you are looking for an unusual home, this is not practical.

The ideal situation is to go out and get very clear on what your options are, on house style, neighbourhood, prices etc. If you find several places that meet your criteria and you’d be happy living in, then hopefully this would give you the confidence to put your home up for sale.

If you were looking for a unique property, then selling first may not make sense. But here is the problem-if it’s a unique property you’re looking for, chances are that type of property is in high demand. This would mean you would have to buy conditionally on the sale of your home, or buy firm.

Although I do not lightly recommend buying before you have sold, I’ve done it myself, and we bought firm in a tough market! ( By the way all of our clients who have brought firm have sold and closed in time).

If you don’t want to let go of your home before you find your new place or if your dream home comes up sooner than you expected, then this is the situation you find yourself in. There is also the strong likelihood of your conditional offer being bumped, or not accepted at all.

Lets look at your three options;

Selling first

Upside

You know exactly how much money you are working with.
You have the uncertainty and pressure of the selling process behind you.
You have greater negotiating strength at the buying end.
You are minimizing your financial risk.

Downside

You haven't found you dream home yet. Don’t get that homeless feeling!

Strategy

Negotiate a longer closing on your home, with a flexible closing date clause. We do this often. The flexible closing date must be negotiated into the offer.
Remember every day on the MlS system is a new day. There may be nothing for days or even weeks and then a couple of good homes can pop up at the same time.
Be patient. Don’t be in a hurry, and don’t be too anxious. My concern when a family sells first is they get anxious to buy-stats say that people typically buy within 2 weeks of selling their home. Fight the tendency to buy just for the sake of having the issue resolved, and have faith that the right house for you will come along.
As a fall back plan, you would have consider storing your furniture and finding a short term lease. These leases can usually be found. Sure it’s very inconvenient especially with children, but this is worst case scenario and rarely happens.

Selling first also makes is sense when you are selling a high end home or are downsizing drastically.

Buying Conditionally

Down side

You are not negotiating with the vendor from a position of strength and this is likely to affect bottom line price.
If you are looking at a good home that it newly listed and well priced or if you are looking in a strong sellers market, the listing agent and vendor likely will not be willing to accept a conditional offer.
Your conditional offer may get bumped.

Upside

For many people, the price spread between the home they own and the new home is a key factor in the financial equation, and a cause for uncertainty. The main advantage of buying conditionally, is that you are buying yourselves time.

Stratergy

Be prepared that your offer may be bumped. Even if it’s just a bit of time, the conditional offer gives you the opportunity of putting your home on the market, and testing the waters.
If you are faced with having to firm up, and your home has not yet sold, you can make a more educated decision, because you should have a better sense of where your house will sell and this will hopefully give you more confidence to move forward.

Buy Firm

Upside

You have found your dream home and secured it!

Downside

You have the task of selling your home in a limited time frame.
You don’t know how much money you will get for your home.

Strategy

Negotiate as a long a closing as possible with the vendor with a flexible possession clause, to take the pressure off you on the selling of your home, and to give you flexibility to accommodate buyers.
If you buy firm, you must be prepared to estimate on a conservative value on your home, particularly if your finances are tight. There is a range of market value, you should work your figures based on the conservative end of that range. You wouldn’t want any surprises. It’s not a question of whether you will sell or not, it’s a question of for how much and in what time frame- and time on market is directly tied in with price.
Having bought firm, in my opinion, should not affect the asking price of your home, as I always believe accurate pricing is the best strategy to get top dollar under any circumstances.
Realize having bought firm your become what we call a motivated seller. In my experience with my clients this translates a certain point in the negotiation process, usually after the offer has been back and forth several times, that you will say, well maybe we could squeeze a thousand or two more, but let's just do it!
Worst-case scenario, you must be prepared to carry two homes. With careful planning, correct pricing and good marketing from your agent, this should not happen.
Check out average time on market in your area, and consider that the average closing period from contract to closing is 60 to 90 days, and consider the type of market you are working in.