Upgrading Your Home? Should You Buy Or Sell First?
In This Week’s How's The Market | Edition 78
Upgrading Your Home? Should You Buy Or Sell First?
Land Tax Is Affecting The High End Markets More
An Entertainers Paradise
Upgrading Your Home? Should You Buy Or Sell First?
Embarking on the journey of upgrading your home can be exciting and equally daunting.
Unlike buying your first home, you also need to juggle the complications of selling your property which comes with the difficult question: should I buy or sell first?
In some cases, you may also look at keeping your current property and turning it into an investment property whilst purchasing something else.
In this article, I want to outline some of the pros and cons of buying and selling first as well as outlining why there is no one size fits all solution.
Selling First
Pros:
Financial security: Selling first allows you to know exactly what budget you can work with as you have an unconditional contract on your home.
Buying with less conditions: Once you have an unconditional contract and certainty on what you can spend, you may be able to make stronger and faster offers on properties giving you the ability to move fast which might allow you to win in a competitive offer environment.
Cons:
Timing Challenges: If you are unable to purchase a property and align the settlement dates in time you may have to move twice. If you do not have a friend or family member you can live with in the interim, you may need to find a rental property which can cause two main issues. The first is that moving into a rental will cost you money and this could eat into the funds you planned on using for your next purchase. The second is that most rental properties will not want to sign anyone up for a contract period of less than 12 months. If you do opt to go down this path you subject yourself to the challenges of changing market conditions. If the property market rises between the time of you selling and buying by 5% or 10% you could miss out on potential equity gain and be priced out of the market you wish to live in.
Additional moving costs: if you do have to move homes multiple times, you will likely end up paying for multiple removalists plus have to deal with the stress of moving twice.
Additional storage costs: if you end up renting a place that is smaller than where you currently live or move back in with parents, you may need to pay storage costs for your furniture and belongings.
Buying First
Pros:
No rush: If you are buying first you won’t have to deal with the time pressure of a looming settlement date. This allows you to have more flexibility and less urgency when making offers which may allow you to make a purchase at a better price.
Guaranteed place to live: buying first will eliminate the potential need of living in a rental property or moving back in with parents or friends.
Cons:
Financial uncertainty: the problem with buying first is that you ultimately will not know what you will be able to sell your currently property for. If you end up selling for less than you thought you could, this could put your finances at risk by taking out a larger loan you may not be able to afford or qualify for. If you sell for more than what you expected, you may have been able to afford a better house that you end up missing out on because you didn’t want to take the risk.
Bridging finance: If you cannot align your settlement dates, you may have to utilise bridging finance where you carry mortgages on both properties until your current home settles. This can end up becoming very costly if you are holding both properties for a prolonged period of time.
Losing your deposit: If you can’t sell your property which you need to sell to be able to afford your new home, you may have to rescind the contract which could result in you forfeiting your deposit
Key Considerations
When deciding whether you should buy or sell first, one of the most important things you need to consider is the market conditions you will be buying and selling in.
If you are in a buyers market, it may be more wise to sell first as you do not know how long you property will be on the market and you will have more opportunities to negotiate and secure a property if there is high supply on the market.
If you are in a sellers market and there is low stock and high supply, it may be more wise to buy first as securing a property could take a lot of time and you will be more likely to sell your property in a short period of time.
Keep in mind that there are markets within markets and you may be buying in a sellers market and selling in a buyers market or vice versa.
Establishing Contingencies
One thing we like to do when helping clients through our buyer and vendor advocacy services when they are upgrading their home, is to put conditions into their contracts that allow them to have some flexibility if things don’t go to plan.
For example, if you are buying first you may have a long settlement date with the ability to bring settlement forwards upon written notice or if you have a short settlement date, you may have the ability to rent the property back off the purchaser for a period of up to 6 months to allow you more time to find a place to live.
We also make use of license agreements to help make this process as easy as possible though we will break these down in a future article!
Professional Help
Upgrading your home can be a tricky process that could become very costly if you get it wrong. It involves multiple professionals from mortgage brokers, accountants and real estate agents and it can pay dividends to have a vendor advocate and buyers advocate to gel them all together and manage the process to make sure you get the best result.
If you would like to sit down with a buyer and vendor advocate to help create a plan for you to upgrade your home, you can book in a free, no obligation chat with one of our advocates here.
What The Agents Are Saying
Land tax is causing an oversupply of high-end properties.
Whilst the lower price points sub $1m are performing well and what we would consider to be a hot market, the $2m+ markets are slowing down.
The amount of times I’ve heard the phrase ‘land tax’ in these markets is more than ever before and often cited as key reason for sales from real estate agents and mortgage brokers.
Today I heard of someone who was getting their property ready for sale as they were due to pay a $26k land tax bill this year.
As land tax scales with the value of the land, landlords with houses in the inner city markets on full sized blocks are facing a significant increase in their land tax compared to pre covid. This is because the value of their land has significantly increased as well as the changes to increase the land tax levy for the next 10 years.
This has resulted in more properties coming onto the market in the higher price points that may have been owned for many years or decades.
The Wow Factor!
11 Pygmalion Rise, Warrandyte, Vic 3113
The entertainers paradise. This Warrandyte home has been designed to encapsulate a resort styled feel with an insane outdoor entertainment area equipped with a fire pit, pool, tennis court and kitchen with a bar.
Check it out!
Price guide: $4,400,000 - $4,600,000
In The Media
Danny Wallis: Serial Block buyer slams Victoria, advises other investors to look interstate
As much as you may hate him, this does paint a strong picture for why so many investors are leaving the Victorian market and why the rental crisis in Victoria is likely to get worse before it gets better.
Final Thoughts
Upsizing into your family or forever home is one of the most exciting real estate journeys you will ever be on, but it doesn’t come without stress.
If you are looking for a professional to help guide you through this journey and remove as much stress as possible, feel free to reach out and book in a call to have a chat about your circumstances here.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.
