October 27, 2022 | Homeowner
In A Changing Market, Should You Buy a Home Before You Sell?
No matter what the real estate market is doing, making the choice to buy or sell first is a huge decision and very dependant on your individual scenario. However, this decision becomes even more monumental in the market we are currently seeing unfold in Toronto, with lower home prices and longer selling days. Before you make a choice to buy or sell first, do your homework and understand the risks involved with both the purchase and the sale. Next, reflect and hone in on your personality type and how you will handle the risks and stress if the process becomes more complicated.
The reality is, timing the Toronto real estate market perfectly is virtually impossible. The heated Toronto real estate market is seeing a softening and prices have dropped by 15-20% in many Toronto neighbourhoods. However, well presented and well priced homes and condos are still selling quickly and for good prices, taking into account the price correction.
So, what does this mean if you want to buy and sell a home right now?
The biggest mistake most people make, who are looking to buy a new home and sell their existing one, is focus on each of of these transactions separately. In reality, the buy and sell should work in tandem because the goal should always be to buy and sell in the exact same market. For example, if you made the personal choice to purchase a new home first and are actively shopping for one, you also need to be preparing your current home for sale. Your current home should be listed within 10-14 days after you successfully purchase a new home to minimize any fluctuation in the market. This way whether the market is up, down, or sideways, both transactions are happening in the same or a similar enviroment.
To figure out how this applies to your specific situation, take the time to evaluate the following:
1) How sellable is your current property?
- Does your home have some potentially negative quirks? In a changing market buyers are picker; quirks or challenges can mean the difference between a sellable home and a home that sits on the market for months.
- Is it located on a busy street? Has an awkward layout? Requires significant renovations? A-typical style for the neighbourhood (yes this is really a thing!)
- How has the price correction affected your current house?
- Understanding this piece will require some research with your realtor. It’s not just about selling a house, but also how long it will take and if you can afford for your house to sit on the market or sell for significantly less money than you budgeted for?
➤ Want to learn more about selling your Toronto home?
- When Selling Your Home, It’s Impossible To Time The Market! Or Is It?
- The Cost of Selling A House In Toronto
- Selling Your Home In The Age Of Online Marketing
2) Are you looking for a needle in a haystack in your next home?
- How picky are you? This is the time to be real with yourself. Have you been viewing homes in person and actually liked any of them? Have you analyzed what your new budget will get you and are you happy with that?
- Have you been tracking the actual sales of homes you like or the location of your choice? Does your budget align with what you are looking for in your next home?
- Do the homes you like come up often or are you looking for something truly unique? For example, a very specific neighbourhood, a house with a pool, certain type of renovation, etc. If this is the case, then you should probably wait until this special home comes up and buy first.
After analyzing these 2 factors there is often one that makes the most sense fiscally, but we all know that buying a home is not all about the money and what you can afford. The emotional element on a move up home plays a huge role and cannot be ignored.
➤ Want to learn more about buying a home in Toronto?
- Have We Hit The Bottom Of The Toronto Real Estate Market?
- Key Steps To Buying A House In Toronto
- The Costs Of Buying A House In Toronto
What is the smart choice for you?
- Are you a risk taker? If you buy your next home first, you still have to sell your existing home. In a less heated market, there is more risk involved with that. If your closing dates don’t perfectly align, you will own two homes for a short period of time, which means two mortgages. What if you can’t sell your existing home for months?
- Does the profit from the sale of your current home directly impact your budget for your next home? Although well priced homes are selling well right now, some homes are sitting on the market.
- If knowing exactly how much money you have to buy your next home and the thought of owning two properties stresses you out, then you should probably consider selling first. Negotiate a longer closing period to give yourself some breathing. However, if you don’t buy a new home during this time, you will need to make arrangements to move in with family or rent until you buy. Can you handle that?
Are you taking into account the seasonality of the market?
Selling first in the wrong season could cost you money if the market is expected to increase in the weeks ahead or if a seasonal low is around the corner. For example, selling late in fall may give you the peace of mind to move forward with a purchase, which is great. However, it’s important to note that the fall season in Toronto real estate is shorter than the spring. Why does this matter? A shorter season means less inventory during the months that you would be aggressively house hunting. If you sell in late October or early November, your house hunting season will be cut short when listings start to diminish by end of November until the end of January.
On the flip side, the current market is seeing decent momentum and well priced homes are selling quickly, some even with multiple offers. If you need to maximize the profit from your current house, this fall might be the right time to sell. The experts are predicting further interest rate hikes and this could lead to further price drop – how much would you pay for a “Cristal Ball” now?!?!
Overwhelmed? We can help.
It’s true, there are so many factors to consider and discuss and some of them require diving a bit deeper into personalities and specific circumstances. Sometimes this may require some hard truths and an outside perspective. Evaluating which transaction will be the most challenging so you can tackle this first is what we do best! We have experience, knowledge and patience to analyze all the important angles and help you evaluate which decision is right for your family.
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