A cooling housing market has been good news for those looking to buy their first home, but for homeowners looking to move up the property ladder, the slowdown is more of a mixed blessing.
By Craig Wong, re posted from the Canadian Mortgage Trends website
If you need to sell a home and buy another, the easing in the market adds complexity to your decision.
Davelle Morrison, a broker at Bosley Real Estate Ltd. Brokerage, says it depends on your local market when deciding whether to sell your home first or find your next home and then put your current place up for sale.
“It is important to recognize what kind of market that you’re in, in terms of whether you buy first or sell first,” she said.
“Right now, we’re in that kind of a market where it really does make sense to sell first.”
If you’re looking for a house to buy, a slower market means there will be less of a chance that you’ll find yourself in a bidding war for your new home. That’s good news for potential homebuyers who faced a red-hot market just a few years ago.
But most homeowners need the proceeds from the sale of their current home to make the down payment on the new one and the easing in the market also means it might be harder or take longer than expected to sell your existing property.
That means if you have an offer accepted on a new place without a deal to sell your current home, you’ll have to find a way to bridge the transition financially or delay the closing of the deal until you sell if you don’t want to lose out on the new place.
But if you sell first and close on the sale before you find a home you love to move to, you could find yourself scrambling to find somewhere to lay your head until you find somewhere new to call home.
Morrison said it is important to honest with yourself when it comes to the process of finding a new place.
“If you’re the kind of person who’s extremely, extremely picky and you’re looking for something that’s really specific that doesn’t come out on the market very often, you might need to consider buying first because you might not find what you need if you sell first,” she said.
If that’s the case, Morrison said it is important to take steps to protect yourself.
If you find your dream home before you have a signed deal on your own home and still want to make an offer, she says you’ll want to consider making your offer conditional on the sale of your home.
Anne Alkok, the broker of record at Wahi Realty Inc., said in a hot market a seller might be unwilling to accept such a restriction, but a Realtor can help you understand the current market in your area.
“You do have to be familiar with the market conditions,” she said.
Bridge financing might also be an option, but you’ll have to check with your lender to see if you qualify in addition to qualifying for your mortgage.
A short-term loan to buy your new home before the old one sells could be an option, but it will add costs as interest rates are typically higher than in conventional lending.
Alkok said if your budget is tight and your next purchase depends heavily on what you net from the sale, selling first will give you a clear idea of how much you’ll be able to afford when making your own offer.
Whereas, she says, if you are in a stronger financial position, then you might have more flexibility. “But carrying properties even temporarily does cost money. So it does have to be planned carefully,” she said.
Alkok said there isn’t one choice that works for everyone and it is important to know what you are comfortable with.
“Some people want the certainty. They want to know exactly what their home sells for before they shop. Other people are comfortable making a move first because they’re confident that their home will sell and that they have the financial flexibility to manage the timing.”