Buy or Sell First?

To buy first or to sell first? That is the question on the tip of many a homeowner’s tongue.

Making the decision to move can be hard enough, but once you have mentally committed to upgrading, downsizing, or changing up the scenery, you next need to decide whether you are going to sell your existing property before buying a new one, or whether buying first is more advantageous.

Unfortunately, there is no ‘one size fits all’ solution to this quandary. The answer is often dependent on a few different factors:

1. The individual’s propensity to take on risk

Some people are more comfortable with taking risks than others, and your tolerance for risk may impact whether you choose to buy first or sell first. There are generally more financial and emotional risks associated with buying before selling. If you buy first, you run the risk of not being able to sell your house quickly enough to align the settlement dates, which may make it difficult for you to fund your new purchase. If it takes longer than expected to sell your existing property, you may need to take out a bridging loan to finance your purchase, which can prove costly. There is also the risk of the market softening between buying and selling, which may result in your house selling for less than what you anticipated.

However, if you are not averse to taking risks, have built up significant equity in your current home, are in a strong financial position, or are able to negotiate a long settlement on your purchase, then buying before selling may be an attractive option. It affords you more time to find the perfect home without the pressure of having to move out by a certain date, and it can also work to your advantage if the property market is rising (see the next point for more info!).

We recommend discussing your options thoroughly with your MoneyQuest mortgage broker before making any decisions, as they will be able to illuminate the various financial and emotional risks involved and provide you with a clear picture of your finances.

2. Market movements

It is also important to take the current state of the market into account, before deciding whether to buy first or sell first. If the property market is flat or falling in value, it may be wiser to sell first before the market drops too drastically, which will in turn mean that you are buying when house prices are likely to be lower. However, if the market is rising in value, the opposite applies. It might be more advantageous to buy first in order to secure a reasonable price for your new home before the market blows out, then sell later when property prices are likely to be at their peak.

3. Property supply

Is there an abundance of property listings or are they few and far between? This is another factor that may impact your selling strategy. If property supply is high and demand is low, this may lead to lower house prices and longer selling timeframes. Therefore, in this type of market, the safer option might be to sell first, because finding a buyer that is willing to pay a price that you are happy with may take a while. Plus, you will have peace of mind knowing exactly how much capital you have access to, to purchase your new home, and there will be plenty of houses to choose from (in theory). However, if property listing numbers are low and there is an excess of buyers competing for the same properties, selling first may be risky because you might find it difficult to buy back in, and be forced to rent short term.

There is no simple answer or hard and fast rules when it comes to this age-old question. Your risk appetite, market conditions, and the number of properties up for sale are some factors to consider when deciding between buying first or selling first, but the most important thing to remember is to do your research, evaluate your personal circumstances, and seek professional guidance. Chat to a real estate agent about the state of your local market and seek expert assistance from your MoneyQuest mortgage broker. They will help you to make the right decision based on your specific needs and finances, and guide you through the process step by step.

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