Selling Before Buying vs. Buying Before Selling: Weighing the Pros and Cons

Selling Before Purchasing

When navigating the complex world of property transactions, one of the most critical decisions you will face is whether to sell your current home before purchasing a new one or to buy first and sell later. Both approaches have distinct advantages and disadvantages that can significantly impact your financial position and overall experience during the transition. In this article, we explore the benefits of each. By weighing these factors, you will be better equipped to make an informed decision that aligns with your unique circumstances and property goals.

Advantages

1. Enhanced Understanding of Financial Position: By opting to sell your current property before pursuing a new purchase, you gain a clear perspective on your financial standing. This informed viewpoint is critical for narrowing your home search and making strategic decisions.

2. Access to Liquid Assets: The immediate availability of funds from the sale facilitates confident bidding on new properties, allowing you to engage in transactions without the encumbrance of awaiting the completion of the sale.

3. Increased Flexibility in Offer Acceptance: The absence of a pressing timeline to sell can allow you the luxury of patience, enabling you to wait for offers that genuinely meet your expectations rather than hastily accepting suboptimal terms.

4. Elimination of Bridging Finance: Preemptively selling your home can help you avoid the complexities and financial implications of bridging loans or juggling multiple mortgages, which often incur substantial interest costs and fees.

Disadvantages

1. Potential Market Inflation: A significant risk associated with selling before purchasing is the possibility of property values escalating. In a competitive housing market, delays in the sale could lead to the property you are targeting becoming unaffordable, complicating your search within budget constraints.

2. Temporary Housing Costs: If you finalise the sale of your current home without a new one lined up, you may have to explore short-term living arrangements, such as rentals or staying with relatives, which can introduce unforeseen expenses into your budgeting.

3. Pressure from Time Constraints: After selling your property, you may face the urgency of finding a new residence before an impending vacancy, potentially narrowing your options and leading to rushed decisions.

Purchasing Before Selling

Advantages

1. Enhanced Financial Positioning: Acquiring a new property before liquidating your existing asset could afford you the opportunity to consider a broader range of options and secure a more favourable deal.

2. Avoiding Interim Housing Needs: Purchasing before selling helps you overcome the complications and added expenses often associated with temporary accommodation.

3. Strengthen Negotiating Position: Securing your new home in advance can enhance your negotiating power, allowing for more advantageous terms that suit your needs.

Disadvantages

1. Equity Utilisation: When seeking financing for a new mortgage, you may need to leverage the equity from your current home, which could limit your options.

2. Compounded Financial Responsibilities: Managing two mortgages simultaneously can introduce significant complexity to your financial situation, especially if the sale of your current property takes longer than expected.

3. Down Payment Requirements: If you plan to finance a substantial portion of the new home’s purchase price, be prepared to have a cash down payment of 5% to 10% readily available. This could be challenging if you haven’t yet liquidated your current property.

4. Increased Urgency in Selling: The necessity to transition to a single property may pressure you to accept less favourable offers or make rushed decisions to alleviate the financial strain of dual ownership.

We trust that this detailed examination will be an essential guide as you contemplate your next steps. Should you have any enquiries or require further clarification, please do not hesitate to contact or click here to book an appointment.

To read more articles and latest news from Armstrong Real Estate click here

Armstrong Real Estate has made every attempt to ensure the accuracy of information presented in this article. However, its content is general in nature and does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. It is not intended to constitute tax or financial advice, whether general or personal, nor is it intended to imply any recommendation or opinion about a financial product. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.