If you are looking to buy a new home and sell your existing home you've most likely wondered whether you should buy or sell first.
There are several things to consider when making this decision so you are best prepared for the journey. In part one here we'll look at things to consider when selling first.
- You are in a better position to negotiate your sale price
- You will know what your limit is on purchase price when buying your new home
- The need for bridging finance is less likely
- You can plan ahead and extend the settlement period to allow you to secure your new home
- In a quickly rising market your new home may be more expensive than you planned for
- You may need to consider temporary accommodation if you have not secured a new home by settlement on your sale
- Possibility of storage fees or double the removalists fees
- If permitted under your contract you may use the deposit paid by the purchaser towards the deposit payable on your new home
A main benefit in selling your existing home first is that you will know exactly what you can spend on a new home. This will help you budget your family expenses and make the right move for you and your family. By selling first, you also put yourself in a better position to negotiation the best sale price as you are not under pressure to achieve settlement on a certain date.
In this scenario however, a good option is to have a longer settlement period of approximately 10-12 weeks (or longer if you are moving to an area where properties are scarce). This will allow time for the cooling off period on your sale to come to an end and for you to secure a new home to move into. This will also reduce the likelihood of needing temporary accommodation and extra moving costs.
Releasing your deposit
Many people looking to move on in the property market may be hesitant due to access to funds for a deposit, especially if your deposit funds are tied up in the equity in your home. By selling first you can overcome this issue. Ensure when your Contract is prepared that it allows you to use the deposit being paid by the purchaser prior to settlement. By having this provision in your Contract you will be able to access these funds for your purchase.
If an extended settlement will not work for your buyers you could raise the option of a leaseback provision. By doing this you effectively extend your moving out date until you secure a new home. This is useful if your existing home is one investors are likely to be interested in as they will have a guaranteed tenant from the settlement date. The details of this kind of provision are usually negotiated at the time of exchange.
Contingency plan – Conditional Sale
A last resort to overcome the cons is to make your sale dependent on you purchasing your new home. Your conveyancer or solicitor can insert a clause into the Contract that stipulates that settlement is not triggered until you have secured your new home which will allow you to line up settlement allowing you to only have to move once. Keeping in mind this may reduce the number of buyers interested in your existing home.
Contingency plan - Renting
If the above options do not suit your needs or your purchaser you may need to consider a short term rental until you have secured your new home. If you do consider this option, when looking at rentals be very clear that it is short term situation and check what the termination costs are if you move out earlier than the lease expiry date.
If you're thinking of buying first keep an eye out for part two where we'll outline further considerations to help you prepare for the journey.
Ready to discuss your next buying or selling property transaction? Talk to the team at Coutts Solicitors & Conveyancers.