It's unlikely that the first home you buy will be your forever home. As your family grows or your salary increases you may find yourself wanting to upgrade your current home to one with more rooms, different features, or in new area of town. However, like many people, you may find yourself in the predicament of having to sell your current home in order to finance your next one.
Buying a home and selling a house at the same time can be an overwhelming process. While you're preparing your current house for viewings, attending open homes to find your new dream home, it's likely you're also dealing with multiple real estate agents, as well as trying to figure out how much finance you have for an offer. That's a lot happening all at once - and it's just the tip of the iceberg!
With all of these moving parts going at once it's easy for small things to go unnoticed, but when you're talking about the sale and purchase of a house it's easy for small things to become big problems. The easiest way to start the process is to understand your options.
Selling first vs Buying first
Selling first - By selling your existing home before you put an offer in on your next one, you take all of the guess work out of what you can afford as you already have the money in the bank as it were. Having cash in the bank when putting that offer in will also make you an attractive buyer to the person selling your dream home, which may just give you a little more negotiating power when it comes to putting in an offer.
The biggest consideration for selling first is ensuring you have somewhere to live between the date you move out of your current house and the date you move in to your next home. If you have friends or family you could stay with, or some cash set aside for short-term accomodation, then selling your home first can be a great option. Alternatively, if you have several buyers interested in purchasing your current house then you could have your lawyer negotiate a later settlement date with potential buyers.
An alternative option is to add a condition to the Sale and Purchase Agreement that makes the sale of your house conditional on you finding somewhere to live. Having your lawyer add a condition like this to the agreement takes the stress out of wondering where you might live and leaves you free to hunt the property market for your dream home.
Buying first - In most cases when purchasing your second home before you have sold your first house, you will be putting in an offer to buy a home with the condition that your current house must sell first. If this is the situation you find yourself in keep in mind that you may have to put in a higher offer for the house you are after, in order to make the wait worthwhile for the person selling the house. If someone else is putting an offer of a similar amount in on the same house, and they have cash ready to go, it is likely the seller will accept that offer over yours.
Sometimes however, when you find that dream home, you just can't wait and if you don't want to miss out while trying to sell your house then you could consider applying for a bridging loan. A bridging loan is a short-term loan that may help you buy your new home before you have sold your current house. Bear in mind these loans often come with high interest rates and the approval criteria for getting one can be quite stiff.
Tips for a smooth process
Utilise your settlement date - Where possible negotiate the settlement date to your advantage (especially when it comes to the sale of your property). If you can align it right you may just save yourself the trouble of moving twice! Keep in mind that house offers are all about compromise, so to get the ideal settlement date you may need to be flexible on something else.
Keep a contingency for unexpected costs - What if your house sells for $15,000 less than you thought it would? Or everything was aligned so you only needed to spend one week in hotel but now you find yourself looking for short-term accomodation? Having a back-up plan for your back-up plan, and well-stocked emergency funds means that if the worst happens you're covered, and if it doesn't, you have some spare cash to fit-out your new dream home with some new appliances.
Be sympathetic - Keep in mind that the people selling you your dream home, or the ones buying your current house, are probably just as stressed as you are! They too are likely to be juggling finances, rushing from appointment to appointment with real estate agents to property lawyers.
Less is more - There is bound to be a lot of people already involved in this process (the buyer, the seller, the real estate agent, your mortgage advisor) where possible use the same people across both the buying and selling process. For example using the same property lawyer for both the sale of your house and the purchase of your new home means you'll have one less person to manage, and where possible they'll be able to look for ways to make the two processes link nicely together with things like settlement dates.
Find out what you don't know
You may be surprised that the process of selling a house is more different than the process you went through to buy the house in the first place. As a the seller you have certain obligations to potential buyers (such as statutory disclosures) that if you don't fulfil you could get in a lot of trouble for. Organise a no obligation chat with a property lawyer to find out what your obligations as a seller are.
It's also important to talk to your lawyer early to plan how your timeframes will work – timeframes are very important when buying and selling simultaneously. The team at Govett Quilliam can make sure that this is taken care of and comes at no further cost to you as it is factored into our fixed price structure.
For independent advice from someone who understands the buying and selling process well, and will have your best interests at the centre of their negotiations, contact a member of Govett Quilliam's Property Law team today.