When looking to buy a new home to live in, you might be wondering whether it is best to sell your current property first.
There are pros and cons to both buying and selling as the first move. What you decide will often depend on your individual circumstances.
But there are some key things to consider, as we found out when talking to a real estate expert and mortgage broker for their insights.
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Facts over emotion
Whether you buy or sell first is a “really big decision”, says Real Estate Institute of Australia president Leanne Pilkington.
“Thirty years ago, people always used to sell before they bought … [but] because there are different financing options available today, some people do find the property they want first, then sell.”
When choosing what is best for you, she says it’s important that people consider facts and take the emotion out of the decision.
“You need to understand where you are selling, what are the average days on market, and be mindful of what price you can get.
“Some people have an aspirational price for their property, but that can take longer to achieve.
“Be conservative, and look at [the] worst-case scenario, not best case.”
Broker and finance specialist Jaeneen Cunningham, based on the Gold Coast/Yugambeh language region, says people need an understanding of their financial situation and borrowing power before deciding what option will work for them.
Ms Cunningham, who is also a member of the Mortgage and Finance Association of Australia, says people often experience FOMO (fear of missing out) when it comes to buying property, which can rush them into making the wrong decision.
The pros and cons of buying first
Buying first might mean you’re able to secure the exact property you want without the time-pressure constraints of needing somewhere to live, explains Ms Pilkington.
“There are less properties on the market today than there have been in years gone by.
“People are staying in their homes longer … in part because it’s so expensive to move.”
For that reason, Ms Pilkington says there is less choice, and it can take people longer to find something they really love.
Ms Cunningham says having certainty around where you are moving to will also help with other decisions, such as school and work commitments.
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It may also minimise the need for temporary accommodation between moves.
“By locking your next home in, you won’t be in limbo, and it minimises that disruption or having to do multiple moves,” Ms Cunningham says.
The main drawback of buying first is financial pressure, she says.
Not selling your current property first means you won’t know how much money you’ve got exactly.
And if you’re current home takes longer to sell, Ms Cunningham says you could be paying for two mortgages.
“This could result in accepting a lower price on your property as you will feel pressure to offload it.”
You may also need bridging finance — a short-term loan that can help cover the gap between purchasing a new property and the sale of an existing one.
The interest on bridging loans is usually more than the interest on standard home loans.
The pros and cons of selling first
Selling your current home first gives you better clarity on what buying power you have, say Ms Cunningham.
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It also means you can wait for an offer you are satisfied with.
“And you’re in a stronger [buying] position with funds being available — it gives you more negotiating power,” says Ms Cunningham.
You’re also avoiding paying two mortgages and associated fees at once, as well as bridging finance.
However, if there is a gap between settlement of your current home and the new property you purchase, you may need to find temporary accommodation or move into a rental.
“Not everyone has a mum to go home to,” says Ms Cunningham.
There can be pressure to buy quickly for that reason.
What to ask your agent and broker
Ms Pilkington recommends people talk to their agent about how long similar properties in your area are taking to sell, and see what else is out there.
“Be realistic about the price, and make sure the agent is giving you comparable properties [when considering these factors]
“The more info you have, the more comfortable you can be with your decision.”
Ms Cunningham says people should be talking to a broker before they make any moves to buy or sell because “you don’t know what you don’t know”.
This article contains general information only. You should consider obtaining independent professional advice in relation to your particular circumstances.
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