When my wife and I went househunting this past March, we quickly found a place that was right for us. The problem was, our current house wasn’t ready to go on the market yet. We bought the new home anyway, and endured five weeks of stress before finally managing to sell our old place.
If you’re looking to move, should you follow our strategy, or play it safe, take the conventional route, and first sell your existing house?
Much of the answer depends upon where you live. In our small town, only about a dozen homes in our price range go on the market at any time, and 90% of them don’t fit our criteria. We knew that if we sold first and gave ourselves a buying deadline, we might well have to settle for a ho-hum house. This made no sense, since we were under no economic pressure to move.
Buying first can also be a smart move in a seller’s market where bidding wars make it impossible to predict whether you’ll be able to buy the place you want, even at full asking price. Gabriel and Nancy Chang took their agent’s controversial advice and bought their new house in midtown Toronto before listing their condo. “The buying process could have dragged on forever,” says Gabriel. The Changs had two offers rejected during their search, including one that was a staggering $75,000 over asking price. “A couple of our friends took six or seven months to buy. One made 20 offers before having one accepted.”
Going the traditional route and selling your existing house first makes most sense if you’re operating without much of a financial safety net. In that case, if you can’t sell your current home before your new deal closes, you’re in a heap of trouble. You will either have to carry two mortgages or arrange expensive bridge financing.”If you absolutely need to get $300,000 or you won’t be able to afford your new house, then you definitely want to sell first,” says Graham Reid of Coldwell Banker Terrequity Realty in Toronto.
Selling first also makes sense in a slow market or if there’s something unusual about your home. “If you live in a cookiecutter house, then you know what you’re going to get when you sell,” Reid says. But if the house is in exceptionally good or poor condition, it may not be comparable to others in the area. If it has an odd layout that will appeal to a small number of buyers, it may be equally hard to evaluate. Since you won’t know how much you’ll get for your old place, it will be impossible to budget for your new home.