If you want to move into a new home, it’s not just about finding a new place - you also need someone to buy your old property! This obviously creates a logistical headache - so here are the things you need to know before you pull something like this off.
Know the market conditions.
This is the biggest factor in when you should do your purchase and sale. This determines how much your home could sell for, and the price range of the houses you want to buy. Also, the time it takes to buy and sell can differ depending on the market conditions of the locations of your old home and your desired location for a new home.
Choose the right real estate agent for you.
An experienced real estate agent can be priceless in these times, since buying and selling a home at the same time can be stressful. An experienced agent can help you with marketing, strategies, negotiations and also coordination of the overall process. Remember to pick one who’s knowledgeable in your area, so he / she can guide you in deciding the right listing price.
Figure out your finances.
Firstly, find out how much equity you have in your home. Equity is the difference between the house’s market value and how much you still owe on the mortgage. This affects your lending ability which can play a big factor in buying your new place. Also, it’s important to know your home’s resale value. Do an inspection of repairs and other work the house needs before selling and how much of it you can add to your listing price.
Now that you’ve figured the preliminaries, here are questions you need to ask yourself.
Will my home be able to sell quickly?
How much do I need to find a new home?
Is my equity enough for a bridging loan?
Can I keep both houses at the same time without a bridging loan? Is my income enough?
If you’re still confused and need help deciding, you can always ask your agent for advice.
At this point in time, you have three options:
Sell first, buy later. This is the most viable option if you have little equity or if your house would not be selling fast.
Buy first, sell later. If you have a large enough equity and have strong enough income to own two properties at once, you can go on this road.
Use a bridging loan. Bridging loan is a short-term loan that bridges the gap between securing a property and arranging a long-term loan. Unlike other loans, this loan’s principal is calculated by this formula:
bridging loan principal = value of new home + outstanding mortgage of your old home - the old home’s likely sale price
You can do this if you have a strong enough equity but don’t have an income that could hold two properties at once.
Buy and sell at the same time. This could be a pain to orchestrate - you need to be organised and get ready for negotiations. You could do this if you have a long settlement in your home - your contract should include a clause that allows you to have forward settlement. This long settlement could last up to six months. This could also happen the other way around: buy a home with a long settlement, find a buyer for your old home, settle both homes on the same day. The catch is this: if you don’t buy a new home in time, you might need to move out and rent somewhere. If you don’t sell your home in time, you might lose your deposit in the new home.
Buying a new home and selling your old one could be a crazy roller-coaster ride, if you’re not prepared and organised. If you need more help or advice, I can lend you a hand. Just drop me a line on social media or give me a call on 0418 577 200!