Should I buy or sell first?
What’s better, selling your current home before you buy a new one? Or finding your next place and then selling? It’s a question a lot of people ask, and really, there’s no right or wrong answer - you just need to have all the facts so you can figure out what’s right for YOU. Ultimately, your decision will depend on two things: market dynamics and your personal situation.
Your best bet is to time the sale and purchase so they happen on the same closing date. There are pros and cons with each approach, but with a bit of planning and help from a knowledgeable realtor, a successful transaction with minimal hassles is certainly possible.
Buying first
Pro: You can take your time to find the perfect place.
Con: If your property doesn’t sell fast, you could end up owning two homes at the same time.
When there are more interested buyers than properties for sale, that’s referred to as a seller’s market: one in which sellers have the advantage. In that kind of market, buying first is usually a good idea, especially if you're looking in a competitive price range. It means you can take your time finding a place, and get into a home that checks all (or most) of your boxes. When available properties are limited and demand for them is high, landing on one that has all your must-haves can take a while.
Once you have your new place locked down, you can sell and negotiate closing dates that work for you. However, a possible downside is that you might find yourself owning two homes at the same time, but that’s a low risk in a market that favours sellers. If you do face a short gap where your closing dates don’t line up, bridge financing is an option.
Related info: Bridge financing explained by ratehub.ca
Selling first
Pro: You know exactly how much you can spend on a new place.
Con: You have to find your next place before the first one closes...or move twice and find a place to live between moves.
Selling first means you know exactly how much money you have to work with for your purchase, which is great - there’s no guesswork involved. But it also means you’ll have to find a new place before the sale closes, which can be a challenge in a low-inventory market. If the timing doesn’t work, you may have to find a temporary place to live, like a rental. That’s easy enough to do, but it means moving twice, which isn’t anyone’s idea of a good time.
Facing pressure to buy something in a set timeframe can be also pretty stressful, especially if there’s a lot of competition from other buyers. So in a seller’s market, I usually recommend selling first, and then negotiating a longer closing date if you can, which gives you more time to find a new place.
Have a backup plan
Whatever scenario you're looking at, it's a good idea to be prepared for any potential drawbacks. If you choose to sell before you buy, get your ducks in a row by researching the availability and cost of short-term rentals in your area, or talk with family or friends to see if they're open to having you stay with them during your “gap” time between homes.
If you think buying first is the better option, talk to your lender before starting your search. It will help you understand how much equity you have in your home (and how much you have to work with), and you can also discuss bridge financing and what that will look like in terms of costs.
Every situation is different
No matter what the overall market is doing, your strategy ultimately depends on the conditions in the areas you’re selling in and moving to. We're in a hot, high demand seller's market for houses right now, but condos are slightly different story. There's more inventory available and less demand, so competition isn't quite as fierce.
A knowledgeable realtor can help you navigate all that complexity, factoring in area, housing type and market status to help you make a decision that's right for you.
About Sean Miller
Sean is one of the top realtors at property.ca / condos.ca, with the drive and expertise to guide you through one of the most important financial decisions you’ll ever make. Whether you're a first-time buyer, a seasoned seller, are new to the Toronto market or are looking for a great investment, he makes the experience as stress-free as possible, quickly assessing your needs and offering a full range of options that fit with your lifestyle and budget. Navigating the GTA market is his specialty, and stellar customer service and deep market expertise are his calling cards. He is always ready to go the distance to help clients make the right choice, at the right time and the right price. Get in touch with Sean.