While it’s nice to be selling when markets are strong, this can also cause issues for those who need to sell their home before trying to buy another.
We see this commonly with upgraders and downgraders who are at the time in their lives when they need more space for the family or, on the flip side, would like a smaller home that requires less maintenance as they get older.
Both types of buyers usually need to sell their property before making an offer on another one.
This can be a tricky situation to navigate. Here are some things to consider and some options when upgrading your home.
Appraise your current home
The first thing is to be clear on how much your current home is worth. In a seller’s market, prices can move quickly. Even in the space of a few months, your property might have gained significant value.
You can do this by getting multiple opinions from the leading agents in your area. They can also give you an idea of how fast your home might sell based on the current demand they have.
Also, do your appraisal; both Real Estate and Domain websites have “Sold” properties sections. Compare your property to the closest comparisons listed recently.
Auction
An auction can be very effective at getting the most you can for your property in a hot market. However, if you need more flexibility around the terms, such as settlement, it might be worth considering selling by private treaty.
Longer Settlements
If you need time to buy a home after selling, then it’s well worth pushing for a more extended settlement period on your property.
You can have your conveyancer add an extended settlement clause to your contract of sale to provide you more time to settle. You can even try negotiating the right to call for a settlement sooner than that if you have found another property during the settlement period.
For example, settlement in four months, or sooner (but not sooner than the standard six weeks).
You would give the buyer two weeks’ notice if you want them to settle sooner (i.e., between week 6 and 4 months).
This can provide you with some breathing space to find something else before you have to move out.
If you intend to pursue this option, be sure your real estate agent and your conveyancer both know from the start.
Release of Deposit
It’s typical for purchasers to pay a 5% or 10% deposit when buying a property. But what’s not typical is for the seller to use that deposit until the property is settled.
In a hot market, when buyers are more willing, you may be able to negotiate the release of the deposit. Not to spend as you like, which is rarely permitted, but to use towards your deposit in buying another property.
This works very well if you can find a property within the settlement period of your property.
Again, if you intend to pursue this option, let your real estate agent and your conveyancer know upfront, as it would be more difficult to negotiate after a buyer has seen the standards terms of the contract.
Bridging Loans
If you haven’t sold or settled on your property yet, but want to buy a particular property before you do, a bridging loan might be the answer.
This is a short-term loan usually (up to 12 months) that is closed when your existing property is sold.
There are two types of bridging loans:
Closed bridging loans – used if you have already sold your property and are awaiting settlement.
Open bridging loans - used if your home has not been sold yet.
These loans often come with higher interest rates but are used only for a short term.
Pre-approval
Whatever you decide to do, be sure to speak to your lender or us before you make any decisions to sell or buy a new property. With lending criteria changing, it is essential to have your finance appraised. Then before actually going out there to shop for a property, have a Pre-Approval in hand so you know just how much you can spend.
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