Should You Sell First or Buy First?

Whether to sell or to buy first depends on market conditions, affordability, and your tolerance for risk.

buyers road sellers lane.jpg

In a balanced or buyer’s market, offers conditional on the sale of the buyer’s home are fairly common. Today in Niagara, we are again starting to see conditional sale contracts.

In a seller’s market, sellers favor purchase contracts free of a condition to sell the buyers property. Sellers often have the choice of accepting an offer with the fewest conditions possible. This is especially true if the home’s list price is based on a valuation that reflects market pricing.

Regardless of Market Conditions...

The most desirable homes tend to be positioned in seller’s market territory. These are homes that are competitively priced, appeal to and are affordable to the highest concentration of buyers. Also, the supply and demand of homes varies within different price ranges. For high-end homes the market can shift to a buyer’s market as seen below. Market conditions can be measured by the months of inventory, also known as the absorption rate.

Months of Inventory Analysis For Homes Listed for Sale

Under 5 Months Supply = a Seller's Market

5 to 6 months supply = a Balanced Market

7 to 9 months supply = a Buyer’s Market

Over 9 months supple = an Extreme Buyer’s Market

As an example, in a recent St. Catharines study of MLS listings and sales over three months, the following clearly makes the point: .5 months of inventory at $250,000 or less; 8 months at $250-$350K; 2.3 months at $351-$450K; 4.5 months at $451-$650K; 9 months at $651K +.

Anything under $650 indicates a seller’s market in varying degrees while anything above $650,000 points to a buyer’s market.

So How Does this Relate to Whether to Buy or Sell First?

  • There are buyers who have to know where they’re going before they can sell and those who have to sell before they’re ready to buy.

  • Not everyone can afford to buy a house before they sell theirs as you might have to qualify for two mortgages. Can you afford to hold two properties if your current home sits on the market and does not sell for a few months? If so, consider an open mortgage that can be paid off at any time. Once your home sells, lock into a fixed mortgage.

  • Have a detailed conversation with a mortgage broker and your REALTOR®. Strive to understand your options and costs.

  • Be ready to put your home on the market. Repairs take time, as does staging and listing a home for sale. Time is precious when you’ve got a pending closing date quickly coming up.

  • Ideally, you should be ready to list within 48 hours of signing paperwork to buy. You should also have had the property evaluated by your sales representative.

  • Selling first might mean temporary accommodation but eliminates the risk and cost of owning two homes. It can also give you a strong negotiating position.

  • Bridge financing can only be obtained when you have a firm and binding sale on your home.