The pros and cons of buying before selling

The pros and cons of buying before selling

It's a dilemma: you want to move, but do you buy a new home prior to selling your existing one, or do you wait to move until it's sold? Here's what to think about before you take the plunge.

The risk factor

So you’ve fallen in love with a fabulous new pad you can’t live without. Only thing is, you haven’t even begun the process of selling your existing place to fund the new purchase. On one hand, if you buy first your stressful hunt for a new house will be quickly over. And you would have nabbed something before prices jump up or even skyrocket. 

However, if your old place doesn’t sell, you’ll be in the dire situation of paying off two mortgages. If you do buy before you sell, you’ll need to offload your place fast if you can’t keep it as an investment.

Get advice

Before signing anything, talk to a trusted real estate agent. How quickly your home sells can depend on:
  • Location: research whether your house is in a property hotspot with fast clearance rates
  • Address: homes on busy roads may take longer to sell than quiet streets
  • Market: assess whether it’s generally in good shape or in a slump
  • Property type: apartments often sell faster than houses or other properties
  • Condition: if the home needs a lot of renovation it may be a long, hard sell.

Consider renting

Traditionally the safer route is to sell your home first, then rent another one while searching for a new place. If you quickly find somewhere to buy it won’t cost much to break a lease. You’ll also know exactly how much you can spend on your new home.
On the downside, it’s an extra move, plus there can be fierce competition for rentals. It may be too disruptive for your family or an added stress. And there’s still the threat of property prices rising in the interim.

Long settlements

When buying before selling, ask the vendors if they can stretch the settlement to 12 weeks. This gives you more time to sell your home.

Contact your mortgage provider before you buy

If your old house takes time to sell you may need a bridging loan. You may also be forced to take a lower price than expected. Figure out what you can and can’t afford, and whether it’s worth the risk.