Is having a house to sell holding you back from moving to your dream home?
In this podcast episode, we sit down with mortgage adviser Jenny Cheevers to talk through the different options available when you are buying a home, but already have one you will need to sell.
Our conversation includes:
– Pros and cons of using bridging finance
– Risks of offering ‘subject to sale’ of your own home
– Open bridge vs closed bridge
– Strategies for minimising your risk and reducing your chances of needing bridging finance
– Risks to consider when taking on bridging finance. Hint: run the numbers first
– What to do if you can’t secure bridging finance
Buying a home when you have one to sell
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How to get in touch with Jenny…
Call 027 244 6686
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While you are here, check out: Why you should be using a mortgage broker
Buying a home in a busy market, when you already own a property is actually quite challenging.
The problem being, sellers don’t want to accept an offer that is conditional upon a house sale. But how can you buy a home if you haven’t sold your one first? You could sell your home before you find a new one to move to, but then you might end up homeless or having to rent for a period of time. And that means moving twice once you do buy something!
Moving once sucks. Moving twice is a nightmare.
I have personally coached hundreds of homeowners through this process during my real estate career.
Decide which you will pursue first: Buying or Selling…
Homeowners often can’t conceive of selling their first property without securing another home first. “We don’t want to be homeless!”.
This is completely understandable, especially for families with young kids and pets where renting would be less than ideal. The problem with this approach is it often means that when you find your dream home you need to make your offer subject to the sale of your existing property. This is a sure-fire way to lose out in a competitive situation.
Think about the market in which you are planning on buying a home. Are you going to be competing with multiple cash buyers? Or is a little slower, a little quieter, is it common for offers to be accepted ‘subject to sale’? As a general rule of thumb, the further you move out of a main City, the more likely you are to have success with ‘subject to sale’ offers.
If your offer is subject to the sale of another home you simply don’t have much of a chance when competing with cash buyers. If you do get your offer accepted in a competitive situation it is highly likely you have overpaid for your new home since your offer would have to be way above the next highest cash offer for it to be considered by the owner.
To get around this there are 2 options when buying a home…
Option 1: Secure bridging finance.
Often a bank will approve you to own 2 homes for a short period of time. Thus you can be a cash buyer on your new home. Hopefully, you can secure a long settlement when you buy, then sell your current home before you move in. If you are fortunate you may be able to get the settlement dates to align and never actually need to use the bridging finance. The key here is to get a long settlement on your new home so you have time up your sleeve. This may sound quite scary but it is more common than you might think.
Option 2: Sell your home with a long settlement (eg 3- 4 months).
This is actually the most common solution. It’s also the one that involves the least amount of stress. It is quite easy to find buyers who will settle in 3-4 months time, especially if you are selling a first home type property where your target market is likely currently renting or living with parents (meaning they can often be quite flexible on settlement date).
Sell my home without somewhere to move to? You must be crazy?
Yes, it is daunting to sell your home without knowing where you are going to move to, but the benefits are huge. You can focus on getting the best price, you are under no pressure whatsoever to accept any offer that comes in and you have no impending pressure from the thought of having to potentially cover 2 mortgages.
If it doesn’t feel right at all you simply don’t have to sell. This is a very powerful negotiating situation to be in! If you secure a 4-month settlement then you essentially have 3 months to find your new home, followed by another month to settle and arrange the move.
Key question: Could you secure a new home in 3 months if you were a cash buyer?
Need help specific to your situation? Book a one-on-one consultation online.
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Podcast intro music by //www.davidcuttermusic.