Sell First or Buy First: What Should You Do?

Sell first or buy first

Should I buy or sell a house first

When you buy and sell a house at the same time, you probably would like to

Sell at the highest possible price for the current house
Buy the cheapest possible new home
Have no stress or least pain during the process

Most people also would unknowingly value higher on their existing home than the actual market. However, in reality, it varies with your individual circumstances, priority, risk aversion, and luck.

Should I buy a house before selling mine?

Pros

You may have a higher chance to locate an ideal property
You may have time to make improvements
You may move with no hassle and your moving schedule may meet the family needs.
You may lock the ideal mortgage terms

Cons

You may be under pressure to sell your current home lower than the market.
You may have to match the closing date of the home to be sold with that of the new home.
You may end up carrying 2 mortgages for a while

Is it best to sell your house before buying? or Sell first buy later

Pros

You have a secure and clear budget for the next move
You may have peace of mind to hunt the prospects at your own pace
You may lessen the stress of uncertainty and may avoid potential financial costs like a bridge loan

Cons

Your choice to buy may be limited if it is a seller's market.
You may have to match the closing date of the new home with that of the sold home.

Factors to consider before making a decision

The current market situation and your estimation on the market trend

Different markets require different approaches

In a buyer’s market, selling first may be a better option. You certainly would not like to carry 2 mortgages at the same time or face the challenge of selling below market.
In a seller’s market, buying first may be a better alternative. Your home may easily be sold if the market trend is unchanged. In addition, you may get the premium on the price increase in the new home and the current home may sell high later on.

However, if the market changes, no longer in line with your expectation, the appealing options could double your pain. To lessen the lag between either the sell or purchase could reduce the risk accordingly.

The time to the market

Statistically, in recent years, the housing market is seasonal in Toronto, Ontario, it shows patterns as starting low from Nov to Jan, ramping up until June, then gradually cooling down. Your buying and selling should be adjusted accordingly. However, the epidemic reshaped the chart dramatically with a lot of unpredictability across Canada.

Are both homes in the same micro-market?

Different types of property may move variously in the direction and pace even under the same whole market. For example, the condo market may perform differently from the detached property. There may be a time lag or move differently if both property values have a vast difference.

Your emotional control on uncertainty

If the loss or risk aversion means a lot to you, selling your current home first may be an optimal choice for you.
If the stress of having a limited time to buy a new property is unacceptable to you, then buying first would be better off.
Financial security and capability. If financially allowed or you don’t have much financial stress to carry 2 properties, you could buy a dream place first.

Family reason

If due to the family needs such as avoiding moving or an urgency to buy a house in a specific neighborhood for kids schooling, you are better off to buy a home first. If due to the relationship change, selling first and fast may become the first priority.

Other considerations

Where to stay if you sell first?
How to handle your cumbersome belongings such as furniture, etc
Where to put the money if you have sold your place first
Possible mortgage penalties if you couldn’t port your existing mortgage to the new property within the permitted time period, commonly at 90 days.
Are you able to handle the worst case when you have bought the new one but couldn’t sell the current one?

The Black Swan

Your plan is perfect, your strategy works fine, your time of selling and buying is awesome.
However, your buyer could not close on time, you may then end up with 2 mortgages.
You surely could go for a lawsuit for your damage.
Physiologically, it is not bad to be prepared.

Theoretically, you may make a fairly easier decision under certain scenarios.

You find a dream house and get a great deal, and you are financially capable, you probably would buy first
You move from a lukewarm or stagnant market to a hotter market, you probably would sell first. Vice versa, your decision may lead to buying first.
If you have a clear target or priority which overweights other factors, then choose the appropriate decision accordingly.
If handling a potential 2 mortgage may overstress you, then sell first.

In summary

Life is filled with choices and uncertainty, any bifurcated decision could have a significant impact. Fortunately, holding property long enough could recover the short period of pain if there is no upheaval in the overall market.
What may relieve you is that we’ve designed a realtor package (1% in total, rebate all the rest commission) specializing in the clients who happen to buy and sell a house at the same time, which could at least fiscally mitigate some of your worries.
Apparently, you can choose the individual selling plans ($1000+optional service) or buyer cashback packages (100% Cashback) if it fits you better and saves you more.