Should you Buy First or Sell First?

Author: Tracy Phelan, Broker RE/MAX Garden City Realty Inc. Brokerage | | Categories: Buying A Home , Real Estate Expert , Real Estate Services

Blog by Tracy Phelan Broker RE/MAX Garden City Realty Inc. Brokerage

Making a move is stressful, but what about when you are trying to coordinate both Buying and Selling at the same time? There are a lot of shifting pieces, and the realtors involved work together to insure the smoothest possible transactions for our clients. If you are selling your home and want to close on a new home purchase at the same time, let’s discuss what needs to happen.

Simultaneous closings usually have good results, especially if you don’t need mortgage financing. If you require financing for your new home you will need to be working with a good mortgage lender or bank, and you have ALL your information and paperwork sent to them well in advance. Another option is bridge financing. You will need to discuss this with your lender as you are effectively mortgaging the property you are buying, in its entirety, for the time it takes to close on the property you are selling. You will be charged fees for registering the bridging loan and the interest for the number of days you need it, plus any other administrative charges.

Selling your home ahead of buying is the most risk-free alternative, as neither transaction is contingent on the other. However, this requires your family to make an extra move and have a place to live while you wait to close on a new home. In terms of convenience and expense, it’s not always the best scenario. If you can secure a short-term rental or, put your belongings in storage and stay with family, then you can enjoy taking your time to look for and close on your new home. Another option that sometimes works out is to rent your home back from your buyers while you wait to close on your purchase. This works well when the buyers are not in a hurry to move in and you can agree on a timeframe for you to remain in the home. The buyers’ lawyer is not always in favour of this option.

Buying ahead of selling is a dream in terms of convenience. You can take your time moving, and maybe do some renovations or decorating before you move in. But will you qualify for a new mortgage without a contingency on selling your existing home? If you can swing the mortgage, or are paying cash, it may be a great option for you. Remember to realistically consider how long you can afford to maintain two properties– with maintenance costs– in case it should take you longer than expected to find a buyer for your present home. In this scenario, you may want to rent your new purchase back to the sellers, or list it as a short-term rental, while you wait to close on the sale of your existing home.

Consider your buyers and sellers carefully when trying to coordinate a sale and purchase within a short amount of time. The last thing you need is a seller or buyer who is displaying signs of being uncommitted to the deal. While no deal is guaranteed until all the closing documents have been signed, when you need a purchase or sale to coincide with your schedule, you should carefully evaluate who you sign a contract with. A contract with contingencies on other deals going through, a lender expressing doubt about final financing approval, a low good faith deposit, buyers asking for unreasonable repairs or allowances, or sellers whose moving plans are questionable are red flags that your deal could fall apart.