Buy or Sell First?

Should home owners buy a property before selling their current one or sell before they buy? Often referred to as the chicken or the egg question of property there is no simple answer. In an ideal world you could sell your house and buy a new one on the same day, but rarely does it work like that.

Selling First

Logically, selling first should be the best option as you know exactly how much you can afford to spend. You can then avoid overextending yourself and save time by only searching properties that are within your budget.

The biggest risk is not being able to find another property by the time you are scheduled to settle the sale. Settlement can often be extended but if not you may be forced to rent back from the buyers, pay for temporary accommodation somewhere else or move in with loved ones. All of which can be costly financially and emotionally.

Buying First

Sometimes this may be your only choice if you find your dream home but will miss out by waiting to sell. For others, buying first alleviates the fears of having to find temporary accommodation.

However you will want to make sure you are financially secure if you go down this path. If your property takes longer than expected to sell you will be paying the mortgage for both the property you just purchased as well as the one you are trying to sell simultaneously, which can be a big constraint on your finances.

Bridging finance may be necessary. Similar to a regular home loan, it is a short term option to cover the gap but generally incurs a greater interest rate.

The decision can also come down to what the market is like. If you predict that property values will increase in the area then buying first may be the best option as you could lose buying power if you sell. In contrast if prices are on the decline there may be more affordable options if you sell first.

At the end of the day there is no definitive answer as to what is best. We can only recommend that you try and get the two actions as close together as possible. Depending on what feels more comfortable for your situation is the path you should go down. Just make sure you have suitable backup accommodation if you sell first and the financial constraint for buying if plans do not work out.

If you need help with bridging finance give us a call and we will find you the most affordable option (08) 9289 7777.