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Answering the big question: buy or sell first?

Posted by Abel of Hertford on November 3, 2016

Is selling first the best option?

Reason 1 – You’ll be in a stronger position when buyers start making you offers, meaning you can’t hold out for the best price. This is true because:
• Whenever you sell anything, the best position to be in is when you’re least desperate to sell.
• Reduced pressure means you are more likely to respond rather than react, leaving you free to make clearer decisions that will work for you rather than against you.
• Emotions won’t be running as high as they would if you had started house hunting, found the house of your dreams and would do anything to get your hands on the keys!
• You’ll be able to keep control over the pace of your sale.
• It won’t matter so much if your house doesn’t sell as quickly as you thought it might.

Reason 2 – You’ll be in a stronger negotiating position when you start making offers on your potential new home, making you a vendor’s preferred buyer. This is true because:
• You’ll be the buyer without the ‘dreaded’ chain attached (i.e. the buyer in a position to ‘move quickly’), positioning you as the vendor’s safe bet.
• A seller is more likely to take their property off the market if they receive a reasonable offer from you because they will have more confidence in you than someone who hasn’t started the selling process yet.
• Reduces the worry about being gazumped (provided the seller is trustworthy!).
• You may be able to negotiate a better price for the house than a buyer that still has a property to sell.
• With money in the bank from your sale, you can have 100% confidence in your budget.

The risks of selling your home fast….

Risk 1 –
In a fast-moving market with strong price growth you may end up not being able to afford as much house as you first thought, especially if it takes time to find the right property for you. The worst-case scenario is that you may not be able to get back into the property market at the same level (i.e. you can’t even afford to buy your old house back).Having said that, at the moment interest rates are quite high (maybe even still rising) and outside of London house price growth is slowing. This all reduces the risk of taking your time over finding your new home.

Risk 2 –
If you sell your house and can’t find a new one, it may mean that you have to rent (or stay with family) until you do, eating into your budget giving you less to spend.Most seasoned sellers don’t mind renting. Once you’ve been part of property chain, renting is a far less stressful option. There is no shortage of good quality rental accommodation across the UK. It’s pretty easy to find a short-term let at a reasonable price. Having to get the removal men in twice used to be the big turn-off, but these days it’s not such a big deal. Most decent removal companies will take your belongings and store them for you while you rent (at a very reasonable cost). When you find you do finally buy, they’ll bring it all to your new home.

The risks of trying to buy before you sell….

Risk 1 –
You’ll be in a situation where you’re most vulnerable to being gazumped. If you don’t believe us just ask yourself this, ‘Would you take your house off the market for a buyer that still had a house to sell?’

Risk 2 –
You may have to pay over the odds to secure the house you want. This is because your offer won’t be as attractive as the one from a chain-free buyer.

Risk 3 –
If you need to take on a bridging loan (to complete the final purchase) you are potentially exposing yourself to some quite serious financial risks. Typically, repayments on a bridging loan facility are between 0.75% – 1.25% (of the loan amount per month). That can start to add-up quickly.

It can be crippling if you can’t shift your house and end-up having to pay off your current mortgage and the bridging loan for any substantial length of time.

Anyway, we hope we’ve given you some food for thought and now have a better idea about which to do first… sell your house or try to buy!

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