5 mins read
Do you buy or sell your house first?
There’s no hard and fast rule about whether to sell your property or buy your new home first. It really depends on your personal circumstances and preferences. For many people the financial flexibility that comes from selling your home first makes this the best option. However, if you can afford to, buying a new home first could end up being less stressful. It’s sometimes possible to time your sale so that your old and new homes complete at the same time and you can move straight in.
Below we look at the pros and cons of selling before you buy, and buying before you sell, and offer our advice on helping the process go more smoothly.
Selling before buying
For many people the most financially viable option is to sell their home before they buy a new one. If you sell before you buy, you’ll know exactly how much you can spend on your new home, and won’t have to worry about paying two mortgages at the same time. In some cases selling before you buy will mean having to move into a temporary living situation such as a short term rental, or family home.
Pros of selling before buying:
- You know exactly how much money you can put towards your new home
- There’s no time pressure to find a buyer
- If you’re moving to a new city, renting for a short time can help you decide which area you want to live in
- If you already have a buyer in place, you’ll be in a stronger position to quickly secure your new property. Because you’re ready to buy with no delays, you might be able to use your position to negotiate a better price.
Cons of selling before buying:
- If you have to move into a short term rental property, it can be stressful to have to move twice within a short period of time
- Moving twice can also be expensive. You’ll have to budget for the cost of rent, removal and storage
Buying before selling
Buying before you sell will give you the flexibility to submit offers on new homes without having to worry about where you’ll live. However, unless you have the cash on hand, it can be difficult (but, not impossible) to buy your new home before you’ve sold your old one.
You may be able to include a home sale contingency in your offer which stipulates that you will only buy the property if your current home sells. But, if you don’t already have an offer on your home, this sort of clause is likely to weaken the strength of your offer.
Your other option is to take out a short term or ‘bridge’ loan to pay off your current mortgage. Then when your home sells you can use the proceeds to pay off the loan. This can be risky. These types of loans have high interest rates, and if something goes wrong with your sale, you’ll still be responsible for paying it back on time.
If you’re buying before you sell, you’ll also need to consider: Stamp Duty. If you intend to buy your new home before you’ve sold your old one, you’ll need to pay an increased rate of Stamp Duty Land Tax. When buying an additional residential property, policy dictates that you pay an extra 3% stamp duty, on top of the amount already due. HMRC will refund this 3% if you sell your old home within 3 years - as long as the new house is your new ‘primary residence’. However, to claim this refund, you’ll need to apply on the HMRC website within 3 months of the sale, or 12 months of the filing date of your Stamp Duty Land Tax return, whichever comes later.
Pros of buying before selling:
- You have somewhere to move right away
- You only have to move once; you’ll save money on rent, storage and removal costs
- You’ll be less pressured to make quick buying decisions
Cons of buying before selling:
- You may feel rushed to sell, or accept a lower offer than you would otherwise
- Contingent offers are less competitive
- It may be more difficult to make a competitive offer if your money is tied up in your current home
- You will need to pay a Stamp Duty surcharge upfront, and then later apply for a refund
How to sell and buy a house simultaneously
If you’re lucky you might be able to line up your sale and purchase so you only have to move once.
Use a settlement contingency: wait until you’ve received an offer on your property and then submit an offer on the home you want to buy. Make sure your offer includes a ‘settlement contingency’. This means your offer is dependent on the sale of your existing home completing successfully.
Use the negotiation period to your advantage. Ask the seller of your new home to agree to a date they are prepared to move out. If having the completion dates of your old and new homes close together is important to you, compromise on other areas of the contract as a gesture. For example, which fittings and fixtures are left behind. A seller might be willing to agree to move at the time suited to you, But, this will completely depend on their personal circumstances and good will.
Having the support of an experienced estate agent will be invaluable to helping time your sale so that you can move straight away.
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