Similar to the chicken and egg scenario, one of the greatest conundrums when transacting property is: do you sell before you buy or buy before you sell?
There’s a few points to consider if you’re in the market for a new home, especially if you are considering the subject to sale option.
Depending on your financial capacity, buying a property before you sell your existing home is a good position to be in. It gives you the option to search for something that meets all of your needs without any time pressures.
But for most of us, this scenario is uncommon. There’s not many who have the financial ability to stump up for two mortgages at the same time, so it’s important to crunch the numbers before you take the plunge and make an offer on your dream home.
Subject to sale
One way to buy before you sell without having to simultaneously fund two mortgages is to include a “subject to sale” clause in your offer. While this can be a solution, there are some underlying issues that mean a “subject to sale” clause might not be all it’s cracked up to be.
For example, you can’t be absolutely sure how long it will take to sell your home so there’s going to be an element of uncertainty if you’re traversing this path.
It’s also possible for the seller to instate a 48-hour clause, which means that the vendor can continue to market the property and stage home opens as if your offer is not even on the table. If the vendor receives an offer from another buyer, they are well within their rights to accept it but will give you a period of 48 hours to make your offer unconditional.
Alternative approaches can be especially enticing if they’re a cash offer, even if it’s of a lesser value as it may be perceived to be less of a risk than an offer that relies on sign-off for a new loan.
Get your ducks in a row
It’s widely accepted that the best process is to list and sell your existing home before you make an offer on a new abode. That way, you’re not overextending yourself or adding to what can already be a stressful situation.
Ensure your finances meet your expectations for your dream home. Take the time to speak with you mortgage broker or bank about how much you owe on your existing home, what equity you have and how much you can borrow.
Research real estate agents and speak to some trusted realtors to get an idea about how much your property is worth in the current market. It’s also worth conducing your own inquiries about the prices of similar properties are fetching in your neighbourhood.
What if I sell before a buy?
There are a few things to consider if your home gets snapped up before you find a new property.
- Request a long settlement. Usually, settlement periods are between 21 to 28 days once finance is unconditionally approved. But it’s worth trying to negotiate a longer settlement if you don’t have a new place to call home
- Is it possible to rent your home back? If you’re hopeful of becoming a tenant in your own home, include a condition on the offer and acceptance agreement for the buyer to consider.
- It might not be an ideal situation but you might want to consider moving in with family or friends or to a rental property as a short-term solution until you find the next home you want to purchase. It might be an opportunity to pay no or minimal rent and save more towards your next bricks and mortar investment.
As well as fees and commissions paid to a real estate agent for marketing and selling your home, it’s important to be aware of any additional costs that you may be presented with during the process.
If you are looking to sell an investment property, you will need to consider capital gains tax. You will also be expected to pay stamp duty and settlement fees on your new home. And depending on how much you are looking to invest in marketing your existing home for sale, there may be extra maintenance or property staging costs to pay for to ensure the property looks its best when it’s put on the market.
How is your property value tracking in this shifting market?
Why guess when you can just ask us for a Digital Appraisal of your home or investment property. If it’s been on your mind, but you haven’t had the chance to arrange an appraisal or you would prefer to let your tenants have their privacy, this is your chance to stay informed without the hassle.
Simply get in touch with the property address and a brief description so that I can send you an estimated value based on similar homes sale over the past 12 months.
This report costs nothing and is totally obligation-free, so why wait? Simply get in touch and I will send you the report including market research and comparative market sales within 24 hours.