It’s a first time sellers dilemma for Vancouver home owners.
A client called me last month and told me they’d had a baby and wished to move up to a larger condo. When I met her at a place she wished to view, we had an extensive conversation about the best way for her to get from A to B.
When she left the rental market and bought her first condo it was easy. Now she must figure out how to get her equity out of one condo so that she can purchase another one.
Buy first then sell? Sell first then buy? It is a question I am often asked by first time sellers.
My answer to them is that their decision depends on a number of considerations.
What is their personality and how risk adverse are they and what are the current market conditions. Is it a buyers or sellers market? Are they purchasing a brand new condo or a resale condo? Can they secure bridge financing at the bank?
Generally speaking, in a seller’s market, when prices are rising, it makes more sense to buy first because it is easier to sell than buy. If you sold first it may take you half a year to find another home, due to the limited supply, and because the prices are rising so you may shut yourself out of the market. Also, most buyers want to move within 90 days so you may have to rent until you find a place to buy. Ideally you could try to get the buyer to close quickly and rent back to you til you find another condo.
You should always make sure the bank will bridge your financing for the home you are buying in case the current home doesn’t sell in time or the buyer can’t close when you have to close on the new purchase.
In a buyer’s market, when prices are falling, it makes sense to sell first because it is easier to buy than it is to sell. You then know exactly how much you will net from the sale of your present home and are able to take advantage of the falling prices as a buyer. Or you may rent and ride the downturn out and really make a profit.
If you already own a condo and purchase a pre-sale, it is relatively straight forward. The developer usually gives a set date (or used to) and will close within 30 days of that date. Therefore, you can sell your current home three to five months prior to the developer’s closing date and have ample time.
Another scenario is for the buyer to make an offer on the condo they wish to purchase “subject to the sale of their property within a certain time frame…usually 30-60 days, depending on market conditions. The seller will insert a “time clause” into the contract which says that he will continue to market his condo and if he receives another acceptable offer, that is subject free, he will give you 24 or 48 hours to remove all of your subject clauses or you lose your option to purchase. The latter depends on whether or not your condo has an offer on it and if the bank will give you bridge financing.
In a balanced market, such as the current one, once you ascertain that the product you wish to purchase is in reasonable supply, you can sell first (this way you know exactly how much equity you have in current place) and then buy.
Sellers wont take “subject to offers” in a seller’s market.
I have experienced occasions whereby I am acting as a Buyer Agent and the Seller’s Agent has not inserted a time clause because they are not a knowledgeable agent.
I can help you decide whether it’s a buyer’s or seller’s market and what is your best option
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