TO BUY OR SELL FIRST
It’s a question that has the potential to send any of us into bouts of indecision, causing us to delay any action at all. The financial implications can make it seem like an impossible feat of perfect timing. Perhaps it feels like you have no choice but to jump in somewhat blind and just hope that when it’s all over you’ll have somewhere to live, with your finances in order.
The ‘what ifs’ abound: what if I sell my house but don’t find a suitable property at the same time? What if I end up with nowhere to go? Worse – what if I have to move back in with Mum and Dad?
If you have the resources to buy a new property outright, then these questions will be irrelevant. However; many of us rely on the sale of a current property to fund our purchase of another. If you commit to purchasing a new property before you’ve successfully sold your existing one, you may find yourself seeking bridging finance and paying interest on two properties.
Of course, it can be very tempting to buy first. You’ve found the perfect property and you just can’t let it pass you by. And of course, it’s comforting to be able to forward-plan your move, knowing exactly where you’re going in advance. A word of caution – if you choose to take this course of action, make sure you’re not caught in a financial red zone. There are ways to ensure that you don’t overestimate the value of your existing property and sell at a loss. No one wants to end up servicing two loans if this can be avoided. Before you make an offer on a new property; take the time to invite an astute local agent to give you a market appraisal on your current property and a changeover analysis on the cost to sell it; together with the cost to buy your new home. Then, when you do set off to find or make an offer on your new property, you’ll be able to separate the financial facts from your emotional response, and you’ll make a decision that fits within your means (rather than a decision based on those gorgeous parquetry floors!)
There are other ways you can be prepared to sell your current property quickly if you are keen to purchase first. The key is to not underestimate the time that it will take to get your current property to market. Did you know there are actually 137 separate components represented in listing a property, selling it and reaching settlement? You should work on a timeframe of at least two weeks of solid work to get your property ready. Properties need to be tidied and cleaned, photos and editorials will need to be prepared and approved, specification documents need to be created, and signboards organised. Investors have the advantage of being able to have property photos done months in advance in readiness for the marketing campaign at short notice.
If your feet are itchy and you’re starting to feel ready for that move, there’s no harm in starting your preparations today – know what you have to offer on your next property and be informed when you start scoping the market.