Do you buy or sell first? It’s the classic chicken and egg
It’s the home movers’ dilemma: to sell your current property before buying a new one or vice versa? We look at the pros and cons and talk to the experts.
Co-ordinating selling your existing home with buying a new one can seem like an impossible task. So, no surprise then, some choose to sell their old home first and then take their time to purchase a new one. But are there occasions when buying first may be a better solution?
Selling first – the advantages
Selling first puts you in a stronger buying position. You can move quickly as you have already sold your house and have the cash in the bank and/or a pre-arranged mortgage offer. This is attractive to sellers and gives you an edge over others who are still in a property chain.
If you have sold your own home or have a firm offer, it puts you in a better bargaining position. If you put in a lower offer the seller is more likely to accept as the sale isn’t dependent upon you finding someone to buy your house.
With time on your side, there is less pressure to make a quick sale by reducing the asking price for your home. You could hold on for someone to offer the asking price.
Finally, you will know exactly how much money you have from the sale of your old home to invest in a new property. You can pre-arrange your mortgage.
Selling first – the disadvantages
You may have to rent for a period if you sell first and can’t find a property to buy soon after. This means moving twice with double the hassle and expense. And you may incur fees if you have to put your furniture in storage.
The monthly rental payments could have contributed to paying off your new mortgage.
If there is an extended gap between selling your house or flat and buying a new home, property prices are likely to have risen and you will get less for your money. UK house prices grew by 2.7 per cent in 2017 and 4.5 per cent in 2016.
Renting or living with relatives while you look for a new place to buy, can be stressful.
Buying First – the advantages
In a sellers’ market, buying first is a possible option as your property is likely to sell quickly. So, if you’ve found your dream home and know that you’ll regret letting the opportunity pass you by, it could be a strategy.
Buying first means you won’t have to settle for a home that’s not ideal just to have somewhere to live in the short amount of time it takes to sell your old property. You can take your time to find the perfect location or layout.
There is more certainty if your next home is secured before putting your current property on the market. It’s less of a leap into the unknown.
Bridging loans allow homeowners who haven’t sold their homes to purchase a new property. You may be eligible for a bridging loan if your credit record is good and you have sufficent equity in your current home.
Buying first – the disadvantages.
Most people need to sell their own property first before being able to buy a new home. If you commit yourself in a slower market and don’t sell, you could find yourself in breach of contract situation or juggling two mortgages.
Homeowners can find themselves under pressure to sell quickly and reduce the asking price. They could end up with less equity from the sale of their home to invest in the next.
Bridging loans can be expensive and banks are more reluctant to provide bridging finance after the recession.
What the experts say:
Kevin Joyes of Stevens estate agents in Henfield, said: “You really need to sell first because once you have a buyer for your own home you can go out and make offers on another property. It puts you in such a strong position. We have quite a few clients who will only allow people to view their property if they have already sold their own home or put it on the market and it’s under offer.”
Mr Joyes said if people sell first, estate agents can try and slow down the process by negotiating a longish period between agreeing the offer and exchanging contracts. This can give the seller more time to buy a new place.
“You are not going to be pressured because we tell buyers upfront if people need more time. Some buyers will say that’s absolutely fine and be prepared to wait for a period of time – obviously not forever. Quite a few buyers are in rented accommodation which means they are more flexible and can wait longer.”
Paul Preen, of Lang, Town and Country, agreed “one hundred per cent” it is best to sell first and, if necessary, ask for extra time. “If the buyer is happy to give more time, you can agree the sale and take the property off the market.”
Mr Preen said bridging loans can be hugely expensive. “I come across a lot of people who say they will get one but when they look at the costs involved rethink. In my 25 years as an estate agent, I have only seen one or two because the interest rates are massive and there isn’t a set time scale to finding a buyer.”
Jo Bennett of Southdown Property Solutions, says if you do sell before you buy, it’s important to get as many things as possible agreed in advance, including mortgage offer.
“If I can say to a vendor that I have seen a letter from a building society agreeing the mortgage in principle, it gives me more confidence and I can pass that onto the vendor.”