To buy first or to sell first: that is the question

Daniel Smyth

October, 2009

Whether or not to sell your home before buying a new one is a big dilemma for most home buyers, especially if you have not paid off your mortgage.

There is no one correct answer. Your decision will depend on several factors: the number of homes for sale in the area you are interested in; your ability to compromise; the time you have available to search; how long it will take you to sell your home; the needs of the seller of the home you wish to purchase; your financial purchasing power.

You need to know what choices are available in the area(s) you want to live. If you like several areas, you will generally have more selection. Compromise is necessary when buying a home because it is rare that you will find everything you want.

You should be prepared to spend a lot of time searching for a home. The agent you choose should be committed to your needs, while you should be committed to reviewing all the listings your agent sends you and providing feedback to increase the efficiency of the search.

Also, it is important to consider that it could take a very long time to sell your home, especially if you have a lot of competition.

Let’s assume that you found the home you want to buy and you make an offer. Your agent will advise you that you will be making an offer conditional on selling your home and that you will you will probably have to accept a 72-hour right of first refusal. This means that if your offer is accepted, the seller will continue to entertain other offers and can even accept one without telling you. Once all the conditions of the newly accepted offer have been fulfilled, you will be informed that another offer has been accepted and that all conditions have been removed. The seller is giving you 72 hours to remove all your conditions or else the new offer takes effect and yours becomes null and void. This means you have to show proof that your bank will provide you with an unconditional mortgage to purchase.

If you can afford two mortgages, which not many of us can, you can remove your conditions once you have the mortgage letter from the bank. A bridge loan is another option, but you must be able to qualify and you have to find a bank that will provide you with this letter within 72 hours.

Selling your home before looking for a new one has some advantages. It strengthens your bargaining position, especially if the home you are bidding on gets a second offer. Let’s face it: A conditional offer is less attractive than one that is not conditional.

The downside to selling your home prior to purchasing a new one is you might have to rent until you find a new home.

Furthermore, you might feel pressured into buying a home that is not what you want because you are simply running out of time.

It can be difficult to determine what to do first: buy or sell. If you need more information about this topic, do not hesitate to call and ask questions.

Daniel Smyth, Affiliated Real Estate Agent, Groupe Sutton-Clodem Inc., 514-941-3858.