There’s no right or wrong answer, however, each option has its merits and risks. To help you make an informed decision, here’s a list of pros and cos to help you weigh up your options.
Sell first, then buy
It’s the conventional, more logical way to sell, and it’s a great way to ensure you don’t overstretch yourself in terms of your property budget and mortgage. However, it’s not without its risks.
When is a good time to sell first, then buy?
In a buyer’s market. It is usually much safer to sell your home first since there’s less buyer competition and homes generally take longer to sell.
What we often hear
“When I find something that I like, I’ll put my home on the market. I'll be able to sell my house in a few days.”
The shift towards a buyer’s market means that homes are taking longer to sell than they have in the past few years. In Waikato, the median number of days to sell is 37 days*.
Also keep in mind, that if you find a property you like, someone else might too. Holding off selling may help you avoid the need to find temporary accommodation between homes, but you also run the risk of having to scramble to make a purchase or missing out entirely.
Our advice? Sell early, rather than later to avoid putting yourself under pressure to sell.
*As of December, 2018.
“What if I can’t find a new home that I like?”
It’s true this might happen. However, it is far more preferable than the pressure-scramble scenario above.
A way to avoid this is to have a long settlement period, to give yourself enough time to find a new place you like. Another alternative is to find a short-term rental to give yourself more time to search the market.
“I might end up homeless if I don’t find somewhere new to go.”
We doubt it. Until you sign a Sale and Purchase Agreement the property is still yours. You may withdraw you home from an auction or listing.
There is also the option of finding temporary accommodation or a short-term rental between selling and buying.
Recommended reading: Selling a house 101 (online guide)
Buy first, then sell
Over the last few years, buying a house before selling has become popular in New Zealand, especially in the housing hot spots where strong demand has led to high and fast property sales.
This is especially common for property in sought-after school zones. In the case of Hamilton, decile 10 schools such as Rototuna Junior High, Rototuna Primary School, Te Totara Primary School, and Endeavour School, mean that homes in these catchment areas are snapped up quickly, and often at much higher premiums. For more information about Hamilton's school zones click here.
When is a good time to buy first and then sell?
Typically, in a seller’s market. High buyer demand means homes are snaffled up in a few weeks and there’s increased pressure on buyers to “get in first”.
What we often hear
“But I don’t know what my budget is if I don’t sell my house first.”
With the right research into home sales in your area and a thorough home appraisal, you can get a good
“I’ll end up paying two mortgages at once.”
Unfortunately, this is a risk when you buy before you sell. If you plan to buy first, then sell, always consult a professional financial advisor to learn if you’re in the financial position to cope with this.
Placing a conditional offer on a new property with a “condition to sell” can help to reduce this risk. However, breaking a conditional contract can have major ramifications, so always have a lawyer to look over the contract to fully understand what your obligations are.
Should you end up having to pay two mortgages, you could opt to rent out your old or new home until you’ve successfully sold to lessen the financial strain. You may also consider a rent to buy for your old home.
“I can’t bid at auctions.”
Actually, you can—with the right preparation. Like any other bidder, you’ll need to provide a 10 per cent deposit on the day of the auction if you are successful.
You may also be able to negotiate a longer settlement period to give yourself time to sell your current home.
If a long settlement period is not an option, a bridging loan may be able to help you cover the shortfall between buying and selling.
Important factors to consider
Your finances
Buying and selling property is not a cheap exercise. There’s property marketing, agent fees, due diligence, moving costs and various loans to navigate and pay, and if things don’t go to plan, these costs can rapidly stack up. Always check with a professional financial advisor to ensure you’re in a strong financial position to buy and sell a property—no matter which method you opt to use.
Going conditional
If you’re planning to buy before you sell, you may have the option to put in a conditional offer that’s subject to the sale of your current property within an agreed time.
Our final advice
Whether you plan to sell first then buy or vice versa, if you’re thinking of moving soon, we recommend keeping an eye on the property market and making sure your home is in a sellable state so you can put it on the market quickly and easily.
Navigate buying and selling at the same time with our free guide.
