01 Feb PROPERTY DOWNSIZING: BUY OR SELL FIRST? PART 2
EVALUATING THE PROS AND CONS
In the previous article, you’ve learned that the three main drivers of decision-making when it comes to buying or selling first are risk tolerance, supply and demand, and the property market cycle. You now have, more or less, an idea about what to do next. If you already have formed a decision, evaluate it first. Let’s take a look at the pros and cons of buying or selling first.
Selling First before Buying
Generally, there’s a 60 to a 90-day settlement date for the sale of your property. If you can negotiate for a period longer than that, you’ll find time to buy a new property and move before the settlement date matures.
Selling a property can also have deadlines. For example, if you intend to use the money to partially settle the balance in your new home, you may be pressured to get it sold before a certain date. If you sell first, you can make a move after settlement,
Selling a property first allows you to be focused on the selling aspect alone. As a consequence, you won’t have to go through the psychological and mental process involving buyers trying to cash in on your need to sell.
If you’re too picky or if you missed on the properties that you want, it may take longer for you to buy. As a result, if you sold your property too soon, you may find yourself temporarily renting.
Since the property market can be volatile, prices may rise after you sell. As a consequence, you may encounter buying prices as a challenge. You may end up considering bridging finance just so you can secure a new home.
After selling, you’re options is automatically limited by the properties that are currently for sale in the market. If you have a target location in mind, your options get narrower. You would have to settle for what’s available.
Buying first before Selling
You’ll have more time to search for your dream home when you decide to buy first. If you’re downsizing, that means that you have more time to find the property that meets your needs at the right location. If the property market is cool, you can potentially save money by buying a property for less than its competitive price.
You have more flexibility to negotiate based on the likelihood of your old property getting sold. That means that you can arrange for certain conditions in view of your old property’s performance and value in the current market.
Bridging finance may pose a challenge. It can add to your financial obligations. That’s because you may end up having to manage two separate mortgages at once. Until your old property gets sold, you’re in charge.
If you present a conditional offer to buy based on the time when your old property gets sold, vendors may not want that. On the seller perspective, property prices may rise further or may simply fall, and time on market is very important.
If you really want a specific property but you’re still waiting for your old property to get sold, you may want to offer the vendor something more so that your stake to the new property is maintained. That’s additional cost and/or effort for you.
You now know that the market is unpredictable. In that regard, we say that you move when you want to. There may never be a “right time.” It’s right when it’s right for you. But whether you’re selling or buying first, you need to ready upfront. Before you do anything, go through the presentation work. That way, you’re free to look, buy, or sell whenever you want. It puts you in the driver’s seat.