Looking to Upgrade or downsize? Buying and selling at the same time can be confusing.

Here are Tina’s top tips on how to make it as stressfree as possible:

Wanting to upgrade your home? Or downsize? It seems like a pretty simple process, right?

Think again.

Do I buy first? Or sell first? What if I need funds from the sale of one to use towards the purchase? Do I need bridging finance? Will I even qualify?

Buying and selling, particularly in the current market where stock levels are still a little on the low side, is not without its challenges, especially when navigating the finance process.

 

Anyone working in finance will have horror stories where someone had bought first and then couldn’t sell or had to meet the market to ensure they could settle on their purchase. Here are my top tips on how to ensure the most seamless and stress-free process and the pros and cons of both selling first and buying first:

Sell First

This is not without its own challenges but certainly makes things much easier. It means certainty of the sale proceeds and therefore the spending budget on your next property, especially if you are looking to maximize that next purchase.

The risks in selling first are:

  • You sell but then can't find anything you like and are left joining the already long rental queues or seeking short-term accommodation.
  • The market may move up, and you are priced out of the market and unable to buy back in.
  • You are forced to buy something inferior that, in all honesty, you probably wouldn’t have sold if you knew that was what you were upgrading to.

 

Top Tips:

  • Chat with agents in the area you are wanting to buy in.
  • See how much stock is on the market and how this compares to a “normal market”.
  • How long is the average days on the market?
  • Are properties being sold via Auction or Private treaty? Sold prior?
  • Get a feel for if you sell whether there is likely to be enough stock to give you enough choice.
  • Engage a buyers agent to help you with the purchase to minimize the time out of the market.
  • Sell with a longer selling period to allow you to find time to buy the next property.

 

Buy First

Buying first gives you certainty of the new home’s purchase price and location. This is especially advantageous if you are only moving for a particular reason - think property specifics such as an extra bedroom or living area, location, school zone, etc.

The downside is the reality that selling is not an exact science, and there is no guarantee of what you can sell for. If you speak to three agents, you will likely get three different prices and usually a wide range of potential high and low price. If you wish to buy well under your maximum, with a large buffer of cash, then this is not an issue. Or perhaps you have the financial capability to keep both properties, one as an investment, then again this may not be an issue.

However, if you want to spend every last cent on the next upgrade, then it can be a problem.

Buying first also has the complexity of needing to use the money from the sale, leaving you with the option of:

  • Arranging simultaneous settlements so that funds from the sale of one are used for the purchase.
  • Having a longer settlement on the purchase property to give you time to sell your home.
  • If you have a shorter settlement on the purchase and need to settle afterward on the sale, then you may require bridging finance.

 

As you can see, both scenarios are not without their complexities and risks. When going through this journey, it is crucial to have an expert on your side to review your particular circumstances and advise on the risks of each scenario for you. Working with an experienced finance professional can help you review your options.


Published: 22/4/2024