Selling and Buying a House
Selling and buying a house at the same time can be stressful, but there are definitely things that you can do to prepare yourself to make it easier. This blog will help anyone that is selling and buying a house to smooth out the process. Read on for tips and helpful information!
Know all the costs
Make sure that you’re aware of all of the costs involved in selling and buying a house. When it comes to buying, you’ll need to be prepared to cover items like property transfer tax, lawyer fees, and mortgage insurance (if high ratio). When it comes to selling your house the biggest cost that you’ll need to cover is the real estate commissions, as you’ll be responsible for the gross commission covering both the listing and the selling agent. Make sure you know how much that commission will be, along with other costs such as lawyer fees and how much money you’ll have left over after covering all expenses.
Get pre-approved for your new mortgage
It’s important that you’re ready for when you do find the right home, and the first step to complete when it comes to buying a house is to complete a pre-approval for your new mortgage. There is a lot of documentation to hand in to your mortgage broker, and there may have been changes to mortgage rules or requirements compared to when you bought your first home. The pre-approval process will help to determine how much you can afford before you spend too much time looking for your new home, and will allow you to set a price range that you will be comfortable at on a month to month basis.
Related article: Documents Needed for Mortgage Pre-Approvals in Canada
Make sure your home is ready for sale
Regardless of whether you decide to buy or sell your home first, you’ll need to make sure that your home is ready for sale when the time comes. Start de-cluttering and putting extra things away in boxes and storage. If there’s any repairs that need to be done make sure you get started on them as they will need to be completed by the time you list the property. For a guide, check out our blog Preparing Your Home for Sale.
Research the market
Research the market by checking out what comparable homes in your neighbourhood are selling for. How does your home compare to the ones that are selling in your neighbourhood? Additionally, check out what is available to you in the areas that you want to move to. What are the homes that you’re looking for selling at? Does your estimated sales price of your current home exceed the estimated sales price of your purchase? By researching the market you’ll be able to figure out a listing strategy for your current home, and also a purchasing strategy for your new home.
Reasons to Buy Before Selling
- Lock in your low interest rate:
Interest rates are extremely low right now, and typically your mortgage broker can lock in your rate for 90-120 days. It’s important to note that you need to have your completion date occur within that 3-4month range, not just have an accepted offer by then. If you buy first, you’re more likely to fall within that range and lock in a wicked rate.
- You have some room financially:
One of the cons of buying before selling is taking the risk that your current home won’t sell in time, or you’ll have to bridge finance if the dates for your sale and purchase don’t match up perfectly. If you feel like you can afford a potential bridge, but more importantly are comfortable with potentially paying two mortgages at once, then buying before selling might work better for you.
- Your current home is in high demand with low supply, and it will most likely sell quick:
This will help to minimize the risk of the previous point. If the market says your home is in high demand, and typically all comparables have been selling within 7 days, then your home should do the same
- Your future home is also in high demand with low supply, and you feel you’ll have a difficult time getting in to what you need and want:
It’s really rough in the Greater Vancouver real estate market right now, and if your future home is in high demand with limited supply then you’re most likely looking at a multiple offer scenario. When you buy before selling, you’ll know that even though you may lose out on a multiple offer that you still have a roof over your head at the end of the day.
- You need a large property selection:
Times are difficult, and supply is low. If you know you’re a picky buyer (and that’s OK!) it might not be a bad idea to buy before selling so that you can guarantee you get what you want.
- You plan on renovating your new home significantly:
It can be nice to renovate when you haven’t yet moved in to the house, as renovations can be a bit of a war zone. If you get possession of your new home before you have to move out of your current home, it gives you the ability to renovate while it’s still vacant.
Reasons to Sell Before Buying
- You know the exact dates you need for your purchase, because you’ve already sold and agreed on dates with your buyers:
A pro of selling before buying is that you know the exact dates you need to move out, and thus have an idea of when you need to move in. This will also help to minimize and eliminate bridge financing payments.
- Your mortgage broker doesn’t need to work off of an “estimated” sales price for your home, and can more accurately estimate what you can purchase:
This is huge, because you don’t actually know what you’re going to sell for. At the end of the day, once you do sell your home, you may have been able to purchase more or actually be stretched too thin. Knowing exactly what you can afford is a huge bonus for selling before buying.
- You have alternative living options, and can bunk at a friend or family’s place if you don’t find a home in time:
If the home of your dreams has a quick close and you’re not so sure that your sale will, then do you have alternative living options? Is your sale more about the price or the dates? If you’re worried about being homeless, then selling before buying may not be for you. With that being said, your realtor can certainly negotiate a longer close for your sale, and it’s really not always about the price for everyone – but more about meeting in the middle with price and dates.
- Your property is in high demand with low supply, and your next home is the opposite:
If the home you’re looking for doesn’t have the same kind of demand that your current one does, then it should be an easier transition in and the ball should be in your court. If you don’t think that your new home is going to be a difficult purchase, then you have some flexibility when it comes to selling first.
- You avoid the stress and costs of your home not selling and paying two mortgages:
When you’re selling first, you know that you’ve already sold – which means that you know that you’re not going to have to pay two mortgages at once! If you don’t have the financials or the risk tolerance to keep two mortgages going (which most people don’t), then selling first may be a better option.
Coordinate Closing Dates
When selling and buying a house one of the most difficult things to do is coordinate closing dates. If you decide to sell first, it’s best to choose a longer closing date like 60-90 days so that you give yourself lots of time to find and purchase your new home.
Ideally, you’ll want the completion of your sale to fall before the completion of your purchase so that you can avoid additional costs to set up bridge financing. However, if your new home requires renovations and you’re not interested in being in a construction zone then you may want to coordinate your closing dates a few weeks apart and bridge instead. You may also want to coordinate the closing for your purchase earlier than your sale so that you have a smoother and slower transition in to your new home without having to rush.
Related Article: Closing Date Real Estate
Know Your Options
Bridge financing allows you to own two homes simultaneously as long as you have a firm deal [subjects removed, deposit collected] for both your sale and your purchase. It functions as a short-term loan, in which you can “bridge” the time between your two completion dates in the case that they do not line up perfectly.
Subject to Sale
Subject to sale is a type of contract contingency that you can request when purchasing your new home, and would be relevant to people that are interested in buying first and selling second. This type of subject states that the buyers purchase is dependent on a successful sale of their current home. This contract contingency protects the buyer of the new home in the case that they purchase but cannot sell their current home quickly, as it allows you to back out of the purchase if your current home has difficulty selling. It is important to note that in a hot market the subject to sale clause is almost non-existent, and the sellers of the property that you are interested in may not be open to accept an offer subject to sale.
Now that you have a rough idea of the process involved in selling and buying a house, your next step will be determining the market value of your home. If you’re interested in a free market evaluation, then give us a call at 604-765-0376. Prefer text? 604-319-0200 or email email@example.com to start a conversation. We’re here to help, and we can provide you with a comprehensive pricing strategy and an estimate on the amount that you can get for your home in today’s market.
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