What Should I Do?
Buy or Sell First?

Buy or sell first? A great question.

There are pros and cons each way.

First of all, we don't live in a perfect world. (Well, we do actually, but that's a conversation for another time.)

Sometimes, though, situations are complicated. And sometimes, a risk must be taken if you ever want to attain a goal. Actually ...

The Biggest Risk in Life is
Not Taking a Risk

So, buy or sell first? You may decide, like many homeowners, to buy first. You might consider it the safest way of trading houses - search for your next home (which can take days to years) and when you finally find it, submit an offer with a condition upon the sale of your own home.

You then proceed to list your home with a REALTOR®, sell your own home unconditionally, then remove the condition regarding the sale of your own house from your purchase agreement.

Perfect. Sounds easy. Right?

Not necessarily.

After investing tons of time and effort searching for a home for your family, you may be greeted by a frustrating situation.

The Seller Refuses Your Conditional Offer

Some sellers won't even consider an offer that's conditional on the sale of another house.

Why?

Because they don't really consider it a real sale. From their perspective, a view often shared by their REALTOR®, it's like an option to purchase that will become a purchase if you succeed in selling your own home. So, they refuse to tie up their property with a 'non-sale'.

Buy or sell first? Choosing to buy first could result in investing a huge amount of time and effort in the search, finally finding your dream home ... only to have your hopes crushed.

This is a highly likely scenario, particularly if you're competing with another buyer who has no home to sell, who chose the opposite path of whether to buy or sell first. Or if you're looking, for example, at a piece of Toronto real estate, where the market is often pretty hot.

So, you ask yourself, 'Do I buy firm, and gamble that I sell my house in time to close on my new one, or do I start the search all over again, hoping I find yet another dream home belonging to someone who will entertain my conditional offer, and allow me time to sell my house?'

Another Challenge

... with this option is that no one can really predict the ultimate sale price of your present property. Evaluating a home is, at best, an educated guess. So, if you buy a new place based upon an anticipated sale price for your old digs, and you fail to get it, you may not be able to afford your new home. Oh no!

Let's look at another possibility.

Let's say you find a homeowner who, for whatever reason, agrees to accept your offer conditional on you selling your own house. The seller's agent will insist (it's also standard practice) that an escape clause for the seller be included in the contract, which will allow the seller to continue to show their home to other prospective buyers, and ...

Consider Other Offers

If they accept another offer, you'll receive a notice from the seller, through your REALTOR®, to either waive (remove) your condition(s) and firm up your agreement under the previously agreed terms, or sign a mutual release and have your deposit returned. Depending on the terminology in the escape clause, you might even be forced to remove all your conditions (including financing and home inspection) whether or not they've been fulfilled. So, once released, your dream home becomes the home of the other buyer. And you begin your home search all over again.

There is a possible upside for you though.

Once a seller accepts the condition upon you selling your own house, buyer interest sometimes diminishes. Other buyers may be discouraged from even viewing the home, preferring not to be forced to wait, even the typical 48 hours of an average escape clause period.

Why?

Because they don't want to go to all the effort of viewing and negotiating an agreement, only to learn that the first buyer (you) waived the condition (which is usually your contractual right). This means the second buyer loses the home they wanted.

The downside with this is that you may have to ...

Pay a Little Higher Price

... because no seller really wants this type of condition. They may force you to pay a premium if you want their home.

So, either way, it may be particularly stressful for you.

Buy or sell first? Complicated? Yup - it can be without experienced guidance.

Here's a scenario for you to consider. Let's say a seller accepts your conditional offer. A week later, you receive the Notice to Conditional Buyer, giving you 48 hours to decide whether to remove your conditions or release it.

And you've already accepted a conditional offer on your old home that won't become firm until after your 48 hours have elapsed.

Do you gamble that you might sell your own home firm, and waive the condition(s) in your purchase? If you do, and your sale falls through, you've bought yourself a house. You risk having to close on your purchase even if you fail to sell your own house.

If you don't remove your condition(s), thereby refusing to take the risk, and you release the agreement on the new place, and your sale does firm up, then you've sold your present home, with ...

No Home To Move To

Using the vernacular for getting notice to firm up or release, if you 'get bumped', and your old home hasn't sold firm, and you're not a gambler, you'll probably release the purchase agreement on the new place. If you'd accepted a conditional offer on your old home, and it fails to firm up, then you're back to the drawing board.

The search begins anew.

Buy or sell first? Here's more for you to consider when you're trading houses. The opposite approach is to ...

List Your Present Home Immediately

... at a realistic asking price.

You and your real estate agent can certainly explore the market for your next home, even actually viewing prospective homes, but you refrain from submitting any offers.

Obviously, you avoid the challenges and disappointments as described above. But this method is not completely without risk too.

An advantage, though, is that when you sell your own home, you'll know exactly how much money you have to work with, and how much you can afford to spend on your next place. Your REALTOR® can calculate your cash left over from your sale after real estate commission, outstanding mortgage balance, any discharge penalties and assorted closing costs are deducted.

However, you've sold your home and you don't have another yet.

If you're fortunate, you spotted one while exploring, and you get your offer in right away.

Another advantage here is that you'll likely find yourself in a ...

Stronger Bargaining Position

... because you've already sold your old home. So, your offer will have only the short term, and usually fulfilled, conditions on financing and possibly home inspection.

If your REALTOR® is a strong negotiator, under the right circumstances, they may be able to negotiate more attractive terms, including a lower price, because of this benefit. It will, of course, depend upon the seller's feelings and marketing experience with their home listing.

I suggest that your worse case scenario is that you sell your home first, you can't find a suitable home to purchase, and you simply ...

Rent a House

It's not ideal, but it certainly minimizes your risk, and eliminates the stress about whether to buy or sell first. This method of trading houses means extra effort is required because of the double move. But when you finally find your next home, while living in your rental, you're perfectly poised to pounce on your dream home when it does become available.

A challenge you'll be faced with, whether you buy or sell first, is that you must ...

Coordinate Closing Dates

If you sell your own home first, you may have committed to a fixed date on the sale to which the homeowner of your new place can't agree because of their own plans.

If you buy first, you must commit to a closing date that the buyer of your own home may not be able to accommodate. Imagine losing a sale with a great price just because of the closing date!

Will It Ever End?

During negotiations, the closing (possession) date is often just as important as the price. Hopefully, all the real estate agents involved can successfully negotiate a mutually satisfactory date for all concerned.

So, have a house to sell? What's the best way to go? Buy or sell first?

Well it depends.

I usually recommend to my clients when they're unsure whether to buy or sell first, that they ...

Sell First

... unless the type of property they're wanting to buy is very rare.

If they prefer to buy first, when they find their dream home, I advise them to be prepared to jump right in and buy it without the benefit of a condition pertaining to selling their home. I advise they ensure they're fully prepared for the consequences by having all their finances in place to handle any scenario.

So, how do you feel now? Buy or sell first?

It's not an easy decision.

If you'd like to have professional guidance through this somewhat challenging experience, to have someone help you with the decision on whether to buy or sell first, if you're in my market area, I'd be pleased to assist you. If you're outside my area of expertise, I'm sure I can recommend a REALTOR® for you.

If you have any questions regarding whether to buy or sell first, I invite you to contact me using the 'contact me' tab on the upper left of your screen.

If you're interested in searching Canadian homes for sale, to help you decide whether to buy or sell first, click here.

If you're interested in searching available American homes for sale, click here.

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