The Best Exit Strategy: Buying or Selling First?

There are a lot of stressful aspects to buying, selling and moving in general. However, the logistics of getting out of your current house and into a new one is right up there.

It all comes down to your exit strategy.

Before you take any steps to sell your property, you really need to have a clear plan in your mind that covers the following:

  • Why are you selling?
  • Is there an exact date you need to sell by?
  • Do you need to move by a certain point?
  • Do you need to achieve a certain price point and is it reasonable?
  • If you haven’t bought somewhere else yet, where will you live when you sell your current property?

Understanding these questions and knowing the answers puts you in a stronger position when it comes to negotiating the sale of your current property. Obviously the more exibility you have, the stronger your hand is going to be. For example, if you don’t need to move by a certain time, or need to achieve a certain price, then you can wait for the offer with the conditions that best suit you.

Here are some real life experiences that highlight the pros and cons of buying first vs selling first.

Selling First

One of the benefits of selling first is that you know how much money you have got to play with.

However, depending on the terms of your contract, it can put pressure on you finding a place to buy.

In this case it always pays to have a Plan B!

  • Will you rent?
  • Can you stay with friends or family?
  • Can you put things in storage?

Gemma and Dave’s house sold much quicker than they anticipated. They were lucky their buyers agreed to a 90 day contract, and that their purchase wasn’t subject to the sale of any other properties.

Still, 90 days is a relatively short time to find a house to buy! As a young family relocating 100km away, Gemma and Dave wanted to avoid having to move twice so the pressure was on to find their new family home.

After much looking and a couple of disappointments, they were fortunate to find a home at a good price, with vendors willing to have settlement on the same day as the sale of their home, which was now 60 days out.

“It was a stressful process,” confesses Gemma. “We looked at so many houses and were worried about having to rent for a while. In the end, we were very lucky that it worked out the way it did. Neither the buyers of our house or the vendors of the new place had conditions on other contracts that would impact what we needed to do.”

Buying First

If you buy before you sell, you generally require capital. You need to be able to afford the mortgage on your existing home (if you have one) as well as the new place.

You may be planning on renting your house out or getting a bridging loan. However you need to be prepared for the possibility your place may take longer to sell that you anticipate.

Leticia and Phil were fortunate.

“We got our finance approved before we signed a contract on the new place,” explains Leticia. “Then although we had two mortgages for a short time we were prepared to rent the place out if worse came to worst and we couldn’t sell it roughly around the same time we bought the new place.”

“We weighed up the lesser of two evils and chose to go about it this way because I felt that it was less trouble than selling our place first, moving into a rental and then having to move a second time when we bought again. We had the advantage of qualifying for the finance we needed without having to sell first though – a lot of people would not be so lucky.”

Ian’s experience of buying first wasn’t so easy. He excitedly signed a contract on a place subject to the sale of his property. However, due to unforeseen complications, it took a protracted time to sell. Fortunately, the vendors of his new place were flexible and agreed to extend settlement.

“Unless you can afford to keep your existing property, best to sell first for a number of reasons!” warns Ian.

Everyone’s circumstances are different and it is best to weigh up the advantages of each scenario before making any commitments. Talking to a financial planner and an experienced real estate agent who can give you advice about the market is a wise move.

Contact Sam to get started. Whether you need an appraisal or you’re ready to get moving now, Sam is experienced in the market so you’ll be glad you had a chat.