To Buy First Or Sell First? That Is The Question.
It’s a question we haven’t had to deal with for the better part of two years. In a low inventory environment, and unfathomably strong sellers’ market, 99% of our clients looking to both buy and sell choose to buy first. Why? Because that’s the hardest part! Now that the market is ‘shifting’, read our commentary on what that looks like here, we need to take a more tailored approach to each client’s needs.
Pick Your Poison
As much as we do everything within our power to reduce any sense of pressure or stress in a real estate transaction the reality is that you’re most likely going to be under some time-pressure, either on the buy-side or the sale-side. If you buy first, most clients will need to make sure you at least have a firm-accepted offer on your sale a few weeks prior to your next home’s completion. If you sell first, you have to find your next home as soon as possible or you could potentially end up ‘between homes’ after you pass off the keys to the new owners. Both of those scenarios involve time-pressure, you just have to decide which one you’re more comfortable with. As we often frame it, ‘pick your poison.’
Let’s look at each option, consider the pros and cons, and then finally who might best suit each scenario.
Buying First
Recently I was on the phone with some clients looking to make a move from South Surrey to the Eastern Valley – around Harrison, Agassiz, that kind of area. Their needs are fairly specific and this needs to be their ‘long-term home,’ so although we’ve had their media and measurements ‘in the can’ and ready to go for months, we’re still taking the ‘buy first’ approach. Here’s how I outlined that option to them:
Pros:
– Reduced time pressure on the purchase.
– Able to wait for ‘the perfect property’ to hit the market.
– Can negotiate the price on the buy-side and tap out if it goes higher than comfortable.
Cons:
– Not knowing exactly how much their current home will sell for.
– They must have the ability to sell lower than expected if the market shifts further.
– If their home doesn’t sell within the first two weeks, the time pressure can become stressful.
Now that the sales ratios (sales for the month ÷ inventory = sales ratio) are dropping across the Lower Mainland, showing that not every property is guaranteed to sell; and the number of days on market is climbing, the sale side is not going to be as easy as clients have previously expected. A highest price offer within one week is no longer guaranteed, and that can come with real time pressures. You may even need to secure ‘bridge’ financing if your sale completion is after your purchase completion, make sure to talk to your mortgage broker about whether or not this is an option for you. If you can live with that, then buying first is probably your best option.
Selling First
On the other hand, we have clients that are really stretching to upsize to their next home and every. single. dollar. makes a difference in what they can afford. The good news for them is that what they’re looking for can be relatively abundant now with higher inventory; i.e. Langley condos in the low-to-mid $600k range; Cloverdale townhomes in the mid-to-high $700k range; or Abbotsford single family homes in the low-to-mid $1.3m range. With that abundance we should expect homes to be available for them to write offers on once their current home is sold. Clients that take this approach need to be aware of the below trade:
Pros:
– They will know exactly what’s ‘in their wallet’ for their purchase.
– If the market continues to slow they may be able to sell in a hotter market and buy in a slower one.
– They can take more than one or two weeks to sell their home without immediate pressure to price-drop.
Cons:
– They can’t be so picky on the purchase side, they need to be more adaptable with their criteria.
– If they don’t secure a home in the first two weeks following their sale they may be at risk of being ‘between homes’ for a season.
– While they’re shopping ‘for context’ they may come across a home they love that they’re not in a position to write a winning offer on.
If this is going to be a ‘forever home’ that time pressure on the buy side can weigh heavily but we are expecting more and more clients with fairly flexible expectations on their next home to pluck for this option more and more. If you’re comfortable with considering some of your criteria for your next home as ‘wants’ rather than ‘needs’ then maybe this is the option for you.
‘The Flexibility Scale’
In trying to simplify this decision for our clients I developed a simple tool, I’m calling it ‘The Flexibility Scale’:
Buying First
The client that should consider buying first must have more financial flexibility. They have to be comfortable selling their home for a price they perhaps expected a few weeks ago; $50-100,000 should not be make or break for them; and bridge financing may need to be an option for them, maybe even the ability to carry two mortgages.
Selling First
The client that should consider selling first must have more flexibility on their next home’s criteria. They need to recognize that some of their secondary criteria may need to become ‘bonuses’; be willing to compromise a little on updates they may have to make themselves; and be more geographically flexible to open up more potential homes.
We’re Here To Help
Please feel free to utilize ‘The Flexibility Scale’ to help you make your decision on which path is best for you, and never hesitate to reach out to ask what factors may impact your specific situation. We will always do all we can to help make your move as enjoyable and stress-free a process as possible.