Should You Sell Your Old Home Before Buying a New Home?
by Ozzie Jurock
Thursday, December 18, 2014
As featured in The Real Estate Weekly
Ideally, the time to strategize about the resale of a property is before you even buy it. We all should have a clear idea of what we want to achieve from buying a home, and how we intend to implement that when the time comes to sell. But where our home is concerned, who realistically does that? We start a family, we want to nest, we buy that first home, we’re happy. Who cares about the future?
Well, whether we did consider how to make a good purchase (the library is full of good books – including mine) or not, the time comes where a $25,000 down payment has grown into an equity of $100,000 over a few years. We have more children and we want and can afford to buy a bigger house (we do this on average four times in our lives – so get ready). And then we must face one of the biggest problems as homeowners when we think about a new dream home and then have to wrestle with the problem of not having sold the old one.
On the face of it is easy: Just sell your old house first and, flush with the money of the sale of your property in your pocket, you go get a new one. But just because it’s logical doesn’t mean that’s what we actually do. What we do is we drive around on a Sunday, fall in love (always dangerous) at an open house and then are told by the agent that we have to act fast. “The owner will not accept a subject offer” and “don’t worry the market is good – we will sell your old home in time – no worries”.
And they may well be right. But markets can change at the precise time that your home is put up for sale. So, what if the agent is wrong? That’s where the great joy of the great dream of that new home can turn into a dreadful experience.
Best advice? You should only buy that new home with a subject clause that says: “This offer is subject to the buyer selling his property on or before such and such a date.” And if the owner won’t take it? If the owner insists, you can add a 78- hour clause (if owner gets another offer, you have three days to decide on whether to buy or not).
But you are now safe. No matter what the current market conditions are, real estate markets fluctuate and are local by their very nature. Maybe the Westside is hot but Langley isn’t or vice versa. In all markets (yes, also in Vancouver), prices fluctuate, conditions fluctuate and you might be caught in never-never land – that is, having bought a new home without subjects and not sold your old one.
Stuck with getting bridge loans, credit lines and often two mortgage payments, two sets of property taxes, two strata fees, etc, this can be a nightmare scenario. Even worse, the pressure of not having sold your old house will ensure that you will not get your best price. Yes, you heard me – you WILL NOT! If you have bought and your existing house hasn’t sold and the closing date for the new one comes ever closer, you WILL accept a much lower offer than you had anticipated. Bank on it.
I have seen more people lose money by having to carry two properties for much longer than they (and their agent) had I thought possible. And remember, real estate markets can stay flat or go down longer than you can make the payments.
As with stand-up comedy and practically everything else in life, timing is everything. The degree to which your timing in buying and selling at the same time is accurate, is very often the difference between success and failure. When you look at the market you are looking at a snapshot in time. That's the way it is at that moment but in a month or a year it might be very different. Maybe the market is good today, but what if it takes three months or longer to sell yours. No matter what the circumstances you will always be better off to either sell first or at least try a subject to sale offer on the new property. Carrying two houses is often a self-inflicted wound.
If you choose to buy first, but then lose out and the house that you want sells to someone else, learn to say these three words: “So, what next!”
“But Ozzie, we love this property and MUST have it, even though we haven’t sold our old house!” Well, I capitulate immediately. If it is TRUE love than what does it matter whether you pay too much for it or don’t get enough for the old family home. Nothing more important than love!