by Neil Jenman
READING TIME: 3 MINUTES APX.
Few things make agents more excited than a “seriously motivated vendor”. In lay terms, that means a homeowner with a powerful reason to sell. There are few more powerful reasons than buying another home before selling your existing home.
Most people giving advice in real estate are giving advice based on what’s best for them, not what’s best for the people they advise. If you’re selling one home and planning to buy another – as happens with most people – how do you know what’s best: sell first or buy first?
If you sell first – and if the market is rising rapidly, you may suddenly find that the great price you got for your current home is not so great when you discover the cost of buying your next home. Further, if you sell first and you can’t find what you like in your next home, you could be forced into the indignity of becoming a tenant (which means being treated like a third-class citizen by most agents), plus being saddled with at least six months’ rent plus having to live in at least three homes due to making a double move.
So, here’s the truth: Selling your existing home before you have found another home is very dangerous. It’s not worth the risk.
So, what about buying your next home before selling your existing home? Well, that can be even more dangerous because if you need the money from your existing home to pay for your new home, you could be forced into expensive bridging finance. Or worse, if you are not able to get finance or the terms are too onerous, you risk losing the deposit you’ve paid for your new home – which could be a hundred thousand dollars or more. Another unpalatable scenario that can befall you if you buy before you sell, is that you could be forced into selling your current home below its true value. Agents love it when sellers are under pressure but it’s not something sellers love. Most agents are ever-so-quick to tell buyers you’ve “bought elsewhere” which makes buyers offer far less than they may otherwise have offered.
So, here’s another truth: Buying another home before you sell your current home is very dangerous. It’s not worth the risk.
So, hang on: If you consider the terrible risks in both selling first or buying first, you soon realise a terrible truth – either way, you’re in grave danger.
But there is a safe way to sell your home and buy another. What’s amazing is how many agents or real estate advisors never tell you about this safe way. Either they don’t understand it, or it doesn’t suit their own agendas, but you can be assured, it’s not just the safest way to sell and buy, it’s also the best.
Here’s what you do. You sell and buy at the same time.
Yes, you read it right. Now, before you – or someone who ‘gets in your ear’ – and you think it can’t be done, please read carefully. It is possible to sell and buy simultaneously as any good agent or legal adviser will tell you. It gets done many times every year by people who are well-informed or well-advised.
Here’s how a ‘Simultaneous Sell and Buy’ (as we’ll call it) gets done.
There are four simple steps.
When you place your home for sale, you can sell under any terms you stipulate. You can also make a contract for sale subject to any terms you stipulate. For instance, you could make a sale subject to your favourite football team winning this year’s Grand Final, although that’s probably not a condition that would appeal to many buyers. Still the point needs to be understood: As the owner you set the terms and conditions under which you sell. Therefore, you say to the agent: “We are putting our home for sale under the condition that we will not sign a contract to sell to any buyer until we have found another suitable home for ourselves. We intend to be perfectly reasonable and we will do all we can to not inconvenience any buyers. As soon as we have an interested buyer who has agreed to a price, we will immediately start looking for another home. We think we should be able to find a suitable home between two and six weeks.”
When you consider that the new buyer may live in your home for many years, a couple of weeks or up to six weeks wait is not unreasonable.
WARNING: Do not look for a new home until you are sure you have a strong buyer for your current home. You don’t want to fall in love with an “irresistible” home and get stuck without a buyer for your existing home.
Find the best agent possible – one who understands, accepts and agrees with your terms and one who is prepared to work hard to make sure you achieve these terms. You must stress that your condition of sale is not negotiable. Tell the agent that if any pressure is placed on you to sell before you buy, you will immediately terminate your agreement with the agent.
If your home is attractive and fairly priced, you should find a buyer willing to accept your terms, within two to three weeks. You then ask the buyer to wait for you to find another home.
Just as you can set the terms and conditions when you are selling you can also set the terms and conditions when you are buying. This may mean of course that you will have to do what many buyers do and avoid sellers who are not willing to negotiate terms – usually sales by auction. If you are willing to pay a good price for the right home, then you can be assured of one fact: most sellers will gladly agree to you selling your home in order to buy their home. This will be especially true when you tell them that you have already found a buyer for your current home and that buyer is just ready and waiting for you to buy your next home. The delay to the sellers of your new home should be minimal in this case.
A good agent when you sell and a fair agent when you buy (both can be good and fair when two large commissions are involved) will soon facilitate a simultaneous sell and buy with the help of a good lawyer or conveyancer.
You have now done what smart and careful sellers and re-buyers always do: You have sold and bought simultaneously. Well done. Be proud of yourself.
Oh sure, the nay-sayers will tell you this is too difficult, and lots can go wrong. Really? Well, sure, it’s a bit of work and maybe you might have to wait longer or maybe you will encounter a few challenges. But one thing that’s said by all the people who use the simultaneous sell and buy method is this: It’s less stressful and far safer than either selling first or buying first.
So, now you know the answer to the question: Which is best – to sell first or buy first? The answer is: NEITHER. The correct way – with low risk, low stress and moderately low effort is this: SELL AND BUY AT THE SAME TIME.
When you are in your new home, you’ll be telling all your friends how you did it – and maybe the word will spread. Don’t listen to agents telling you to do what’s best for the agents. Whether you are a seller or a buyer, you can set the terms and conditions of how you sell or buy.
And finally, wouldn’t it be nice if Richmond win another Grand Final!
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