To Buy First Or Sell First? That Is The Question.
I first published our ‘flexibility scale’ in 2022 and it’s been one of the most popular tools we’ve provided clients asking the important question ‘should I buy first or sell first?’ If you find yourself asking that question we hope it will benefit you too!
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
I was reminded recently again of being 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 were 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 doesn’t deliver as expected.
– If their home doesn’t sell within the first few weeks, the time pressure can become stressful.
Now that we’ve had a couple of years with relatively balanced sales ratios (sales for the month ÷ inventory = sales ratio) across the Lower Mainland, showing that not every property is guaranteed to sell; and the number of days on market is longer than we saw in the ‘glory days’, the sale side is not as straightforward as some 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 often 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 with lower sales ratios these past couple of years the gap has closed between what they currently own and their next home. With more listings available we should expect homes to present themselves for clients 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 they are upsizing they may be able to sell in a hotter market and buy in a slower one.
– They can take more than a few weeks to sell their home without immediate pressure to price-drop.
Cons:
– They can’t be so ‘picky’ on the purchase side, they may need to be more adaptable with their criteria.
– If they don’t secure a home in the first few 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 many of our clients these days with fairly flexible expectations to pluck for this option. 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, ‘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 a conservative market analysis suggests; $25-50,000 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