Timing the buying of a new home with the sale of your old one can be a difficult feat to achieve. We outline a number ways to make the process as simple as possible.
Gauge the market
The property market in Australia can be volatile, even more so with the pandemic the world is currently grappling with. When you’re looking to buy and sell you need to assess the market to decide what course of action you’re going to take.
If the market is currently rising, so prices are going up, it’s recommended you buy first and sell second. This is so you buy at a lower price and sell for a higher price. Doing the inverse in a rising market may mean you miss out on value on your old home and end up paying more for your new one. This strategy does come with the danger that if you can’t get a sale on your new home before you settle on your old one, you’ll be paying two mortgages.
In a market where house prices are falling, it’s recommended you sell first and buy second. This is so you get the best possible value for your old home, and may get a cheaper price on your new place. This strategy will give you a clear budget for your new place and the required deposit, should you not already have one. However, if you don’t find a new place before your old home settles, you may have to rent somewhere to live until you find somewhere, also meaning you would have to move house twice.
“Subject to completion of sale”
When submitting an offer to buy a home, you can state in the contract that buying the home is “subject to completion of sale”. This means you only need to fork out for the purchase after your previous home has been sold. This can remove much of the stress of figuring out whether you’ll need to rent a place before moving into your new home.
However, this approach may make you less attractive to the seller than someone who isn’t stipulating this clause. As a result, you may have to put in a higher offer to convince the seller to accept the offer. You’ll also have to enter a deadline for the sale of your old home, at which point the contract is nullified, to give the seller some sort of timeline.
A simultaneous settlement is when the purchase of your new home and the sale of your old home happens on the same day. It sounds great in theory, but its incredibly hard to achieve in practice. It requires a great deal of communication with all parties involved and the various legal and real estate professionals involved. It’s fraught with danger as if there’s an even minor problem, the whole process needs to be rescheduled. Such an issue could cost you in penalty interest, or in a worst-case scenario, see you lose your deposit.
Extend the settlement period
The seller of a home sets the settlement date in the contract of a sale, and the settlement period is typically 30 to 90 days. If you’re looking to attempt a simultaneous settlement, extending the settlement period can increase your chances of success. You can request an extended settlement period from the seller whether you’re buying or selling first and can request anywhere from three to six months. Of course, the seller doesn’t have to agree to this, so you again may have to sweeten the deal in some way to make it an attractive proposition to them.
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