One of the many questions I get asked regularly is whether one should buy first or sell first. The answer depends on your circumstances and the current market conditions.
There is no universal approach because both options have their advantages and risks. The right choice depends on factors such as financial situation, the state of the local real estate market, and tolerance for uncertainty. Let’s break it down.
Selling First
Selling your current home before purchasing a new one provides financial clarity. You’ll know exactly how much money you have to work with, which allows for informed decisions when buying. This approach can also reduce stress, as you won’t have to carry two mortgages or worry about bridging financing if your home takes longer to sell than expected.
However, selling first can come with challenges, particularly if a suitable home isn’t found right away. Temporary accommodations may be needed, which could mean renting or staying with family while searching for the next property. In a market where inventory is low and competition is high, this can be a concern, especially if there are specific needs for the new home. However, when inventory is high, this is less of a problem, but of course still a risk if you are looking for something very specific in a certain area and at a certain price.
Buying First
Buying first means avoiding the pressure of rushing to find a new property after selling. This approach is particularly useful in a competitive market where desirable homes don’t stay available for long. It allows time to secure the right property without feeling like settling out of necessity.
That said, buying first can carry financial risks. If the current home doesn’t sell as quickly as anticipated, carrying two mortgages for a period of time may be necessary. Additionally, in a declining market, the home may sell for less than expected, affecting financial planning. In these situations, having a strong financial buffer or arranging bridge financing can help mitigate risks. Another issue is that you may not be able to secure bridge financing unless you have sold your existing home, and in a declining market, you might need to list lower than the previous comparable to make sure your home gets noticed and ultimately sold. If your budget is tight, this is not an option I recommend.
Market Conditions Matter
In a seller’s market, where demand is high and listings move quickly, buying first may be safer, as there is confidence in selling the current home with favorable terms. On the other hand, in a buyer’s market, where homes take longer to sell and prices may be softening, selling first is often the safer route to avoid being stuck with two properties. Right now at the time of writing this, there is a lot of uncertainty, fewer homes are selling, homes are taking longer to sell, and in most of the GTA, we are seeing a small drop in prices.
Personal Factors to Consider
Beyond market trends, personal circumstances play a major role. If a flexible timeline and financial comfort in managing two properties exist, buying first might work. If financial security and minimizing stress are the priorities, selling first is likely the better choice. The key is to assess risk tolerance, financial situation, and overall goals before making a decision.
Final Thoughts
There’s no one-size-fits-all answer to whether buying first or selling first is the better option. Understanding the market, financial position, and comfort level with risk will help guide the decision. Let’s get together for a coffee and discuss this further to see if we can come up with a plan that works for you. Feel free to reach out anytime.