This comprehensive guide covers strategic approaches including selling first, sale contingencies, bridge financing, and more. Discover expert insights to balance risk, financial options, and market conditions, empowering you to make informed decisions in your real estate journey.
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“Help!! We are wanting to upgrade from our first home and really unsure of the sequencing of steps to buy a new house. We heard buying with condition of sale was something to explore but it looks like the market is turning, especially coming up to the summer. Should we sell first (long settlement) and then it would put us in a position to be able to go unconditional if we make an offer? It makes me super anxious as we have a young family and no extended family to stay with if we didn’t find a house and could end up scrambling to find a rental and would eat through our deposit. Any tips community?!”
(Original question on Reddit)
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Buying a new home while selling your current one can indeed be a bit of a juggling act, especially in a dynamic market. The decision largely depends on your risk tolerance, financial situation, and the specific conditions of the real estate market in your area. Here are a few points to consider:
Selling First:
Selling your current home before buying a new one can provide a clearer financial picture and reduce the risk of carrying two mortgages. It also puts you in a stronger position to make offers on new homes, as you won’t have a sale contingency attached.
Buying with a Sale Contingency:
This could be an option to explore, but in a competitive market, a seller might be less inclined to accept an offer with a sale contingency. However, it could still be viable if the seller is motivated or in a slower market.
Bridge Financing or Rent-Back Options:
These could be temporary solutions if you sell your house before finding a new one. Bridge financing helps cover the gap between buying and selling, while a rent-back agreement allows you to rent your old house from the new owner for a period after the sale.
Pre-Approval for a Mortgage:
Getting pre-approved for a mortgage can give you a better idea of your budget and potential loan amount. It could offer more confidence when making offers, even if your current house hasn’t sold yet.
Flexible Settlement Terms:
Negotiating longer settlement terms with your buyer could give you more time to find your new home. You can also negotiate a clause allowing you to extend the settlement if needed.
Rental Options:
While not ideal, having a backup plan for temporary accommodation, such as short-term rentals or staying with friends or family, could provide some peace of mind in case there’s a gap between selling and buying.
It might be beneficial to consult a real estate agent or a financial advisor who can offer personalized advice based on the specifics of your situation and the local market conditions. It’s also helpful to have a clear understanding of your financial capabilities, the local market trends, and the willingness to take on a bit of risk in such transactions.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
