Buying or selling property - what should come first?

When upgrading, downsizing or simply moving house, if you already own a home you’ll inevitably be faced with the same question: should I sell first or buy first? Like most decisions we make involving our financial and physical well-being, there is no clear cut, one-size-fits-all answer. There are, however, a number of questions you can ask yourself to determine the best course of action for your property endeavours.

What you need to know before making a decision is: Do I need to sell? What is my appetite for risk? Am I more concerned about overpaying or missing out? Are the market conditions where I own currently different from where I am purchasing? Before we look at the big question of buying or selling first, it’s important to check if you need to sell at all.

Is holding on to both properties an option?

When it comes to real estate, your first port of call should always be with the person in charge of your money. If you are in a position where you can purchase property without the need for bank lending then congratulations, however for many, finance is necessary to move forward. Discuss with your bank or mortgage broker what your options are. You may find you are able to retain your existing property as a rental, or perhaps you can get bridging finance to help you transition from one property to the next without any additional financial pressure. If you are not able to retain your original property, it’s time to look at the pros and cons of buying or selling first.

Choosing to sell before buying

Selling your existing property first means achieving buying power by way of limiting the conditions required for you to purchase your next home and by knowing exactly what you can afford to pay. It may allow you to bid confidently at an auction, or allow you to beat your competition in a multi-offer scenario by offering preferable conditions (or even being unconditional) compared to others who may be ‘subject to sale’. The downside of this option is you may find yourself at the mercy of time pressure as you scramble to find a home. If this happens at a time when there is limited stock on the market you may feel pressure to pay top dollar to secure a new asset, or make some compromises on property features in order to put a roof over you and your family’s head. Selling first gives you buying power in the housing market, but you potentially sacrifice, albeit temporarily, the security of being in your own home.

Choosing to buy before selling

Should you choose to try and purchase before you sell, the main benefit you will see is that precious commodity: time. You can attend open homes and viewings, weigh up the advantages and disadvantages of each property as it pertains to your needs and pass or place offers depending on your desires rather than out of necessity. The downside of this is when it comes to submitting an offer on a property you like with a ‘subject to sale’ clause, your offer may not be as strong when it comes to competition and negotiation. The seller will want to know how saleable your home is, where it is, what status the campaign is at, etc. prior to deciding whether or not to accept your offer. There may be a need to offer above asking price and even then you could get beaten by a lower dollar value with an unconditional offer. Once your offer has been accepted and your property is on the market, there’s potentially pressure to accept the first offer on your home to facilitate the move. The big benefit of buying before selling is that you have time and certainty on your side with the downside being you may lose a degree of power in the selling market.

Assessing your risk profile

Now that we have assessed the two sides of each option, it’s important to evaluate your appetite for risk. Risk is a commodity that can be utilised and leveraged if you understand your own aversion or attraction to it. Can you mitigate your risk by way of a backup plan? Are you able to live with family if you can’t secure a property in time? Are you able to rent until you find a property you want to purchase? Do you have pets, children, or other dependants that need to be considered in the equation? Will you have to store your furniture somewhere if you can’t buy a property? If the lack of guaranteed security for an unknown length of time is too tough to fathom then it’s likely that you should wait to sell your existing home until you’ve secured the next. If you find that you are comfortable with selling and waiting a period of time without owning the next without too much stress, then perhaps you’re more suited to selling first.

FOMO or FOOP?

In dealing with property, we often work with purchasers concerned about either the fear of missing out (FOMO) or the fear of over-paying (FOOP) and at times worrying about both! Both are valid concerns, however, for the most part, they are only concerns at the point of contract and quickly become unimportant after a successful property purchase. To alleviate both of those worries, it makes sense to give yourself the strongest purchasing power possible. This could mean the ability to offer on a property unconditionally – or as close to unconditional as possible. An unconditional offer in the hands of a seller can be tempting even if the price is not as high as others; the security of a ‘done deal’ is enticing. If at this point your FOMO or your FOOP outweighs the concerns you’ve raised in your own risk assessment, your best option moving forwards is to sell first and vice versa if your risk concerns overshadow your FOMO/FOOP.

Understanding the property market

It's important to understand the market you are entering and the market you are exiting when evaluating the decision to buy first or sell first. If you are buying and selling in the same market then it’s worth educating yourself on current market conditions such as average sale price, average days on market, is it a buyer’s market/is it a seller’s market, how many similar properties are available now etc. If, however, you are moving from one market to another with different market conditions, this will definitely have an impact on your decision to sell first or not.

Once again, this will weigh into your risk assessment of yourself – if you are leaving a fast-paced market with property still performing well at auction and buyers outnumbering the available property and buying into a slower buyers’ market, you may see sellers more likely to accept an offer subject to the sale of your property. If you are looking at the opposite of this, it would be challenging to enter a fast-moving market with an offer that is subject to the sale of a property that may take in excess of 60 days to sell.

Once you’ve weighed up the above you can make your decision and put yourself into the market. Talk to a real estate agent in the area you are looking to purchase to discuss all of the factors above, with emphasis on the current market status. At the end of the day, only you will have the best understanding of you and/or your family’s needs moving forward, so trust your gut and go with what you’re comfortable with.

To talk further about the current market, please get in touch with one of our team.