What To Do First...Buy or Sell?
In theory, there are some basic guidelines to help you decide. These guidelines are based predominantly on the market conditions at the time you are considering to move. We advise our clients in Richmond Hill and Toronto to follow these guidelines because they protect your interests.
Buyers' Market Condition:
A buyers' market occurs when there are more homes available for sale than there are buyers looking to make a purchase. This affords buyers the benefit of more selection and causes a greater degree of price competition between sellers, allowing buyers to get exceptional value for their dollar.
Guideline: SELL FIRST, BUY SECOND
Rational:
With there being so many homes on the market for you to compete with as a seller under these conditions, a significant amount of your negotiating leverage can disappear if you buy before you sell. By buying first you have placed time constraints upon yourself. You now have to sell your current home in order free up the capital to put into the home you have just purchased. With the steep competition on the selling side, and time constrictions you may have to lower your price to generate more interest for an immediate sale, or accept an offer lower than you would like. The other significant risk you run by buying first is that if you are not able to find a buyer prior to the closing of your new home you are forced to carry two mortgages until you can sell the original property.
Conversely if you sell your home prior to buying, you will know the exact proceeds of your sale, which provides you a clear understanding of your financial position for making your purchase decision. With all of the selection in the market place and your home sold, you are gaining considerable leverage for your purchase negotiation.
Sellers' Market Condition:
A sellers' market occurs when there are more buyers in the market than there are homes available for sale. This provides an advantage to the sellers and results in more homes ending up being sold in "Bidding Wars" as multiple buyers compete for the same property. These conditions allow sellers the ability to maximize the return they will receive on their home.
Guideline: SELL FIRST, BUY SECOND
Rational:
I know that this guideline may almost seem comical because it appears to be the exact same strategy used in a Buyers' Market, but the rational behind this strategy is sound.
In a Sellers' Market there is a high probability that your house will sell. Developing a strategy to maximize the sale price becomes the focus. Always remember when selling your home under these conditions you have the leverage at the negotiating table. This allows you to control negotiable terms such as including a long closing period. This long closing period is important because it provides you the time to find a suitable property to purchase without feeling pressured that you are being rushed out of the home you have just sold.
Buying in a Sellers' Market has some similarities to the buyers' market situation such as having a full understanding of your finances including the net proceeds from the sale of your property prior to making your purchase. Another very important factor to making a sound purchase decision is keeping your emotions in check. This can be more difficult than it sounds because it may involve you walking away from a home that you absolutely love due to buyer competition driving the price of the home significantly above its market value. Overpaying for a property in a bidding war only exposes you to future risk, and diminishes the future returns on your investment. As experienced real estate professionals we will assist you in understanding the market value for any potential property, thus preventing you from making a costly emotional decision.
Presently we are in a Sellers' Market due to the lack of homes available for sale. It is likely that the market conditions will shift back towards equilibrium with the spring market approaching. An influx of properties for sale is likely to take place over the next six weeks.
The above guidelines are only theory for the purposes of study and discussion, but reality should dictate your decision to buy or sell. Everyone and every situation is different and as such the only person qualified to assist you in evaluating these factors and developing a strategy for your situation is an experienced real estate professional. This is too important of a decision to act on emotion and there are many factors to consider. To ensure you are making the right decision for your situation, CALL US TODAY TO DISCUSS WHAT WOULD BE IN YOUR BEST INTERESTS AT THIS TIME.
