This is a question I get asked all the time. People are concerned that they will not be able to find a home to purchase if they sell their current home first. they sometimes also don't want to move unless they get the specific property they've had their eye on.
I've always given the same answer to this question which has been "SELL FIRST" but lately I've been relaxing a bit on this answer due to the opportunitites emerging as a result of our slowing market. Let me explain the pro and cons so you can make the decision for yourself.
Selling first, then buying:
The good news is that you know exactly how much money you have to spend on your next purchase and you don't have to worry about your current property anymore as someone else has bought it! You also have a lot of flexibility in your next purchase. As you won't need to include a "subject to sale" clause in your offer, you will be in a stronger negotiating position. Sellers are looking for Buyers who can buy right now, not "hopefully soon once my house sells" ( if it sells at all).
In our current market, if you list your property for sale on the Westside, there is only a 42% chance that it will even sell. Most people don't realize this. Your biggest risk is that you may not find a property you would like to buy in the 30-60 days you are given before you must move out of your old place. The worse case scenario is that you end up having to rent for a while. But renting gives you the most flexibility (other than living with your parents) in finding a place to buy. And with the market declining, that really wouldn't be such a bad idea!
Buying first, then selling:
The upside is that you know exactly where you are going to be moving to which takes care of the reason why many people want to take this approach: fear of the unknown. BUT this is very risky proposition and I have seen a number of people get burned - especially in a softening market. People are worried about the time restraints in selling first and then having to find a place to buy, but there are also major time restraints when you buy first. Instead of having to find a new place in time, you now need to sell within 30-60 days and this is much more difficult to do when only 42% of listing are selling and you are trying to get top dollar!
If you can't sell it in time or the dates don't line up with your new purchase, you are then stuck owning two properties at the same time which in Vancouver, not many of us can afford to do. It's scary! If you are financially secure enough to do this, then by all means this is ideal. I personally would rather have to find a place to rent temporarily with a bunch of cash in the bank than owe money on two mortgages which I cannot afford to pay.
An emerging solution:
Subject to Sale. This has not really been possible over the last decade as the market has been so strong that it hasn't been in the seller's best interest to take a Subject to Sale offer. When you insert a Subject to Sale clause it means that you can tie up the property you want but are asking the Seller to hold it for you until you manage to sell your current property. Now that the market is quieter and sellers are hoping for offers, I'm seeing that some of them are agreeing to accept Subject to Sale clauses. You still often pay more for this priviledge but at least it is now possible. The downside is that if they receive another offer, you get bumped with 24-72 hours notice, and you're back to square one.
I still believe one should sell first, especially since prices are still very near all-time highs, but if you REALLY need to know where you're going next before you make any decisions about selling, then here is your window of opportunity. Your realtor will guide you through the process and there is a chance that it could all work out perfectly!
Sayo's advice for the moment? Sell first, rent for a while, then pick up a good deal down the road. It's not for everyone, but think about it!
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