Deciding whether to buy or sell first can be a difficult decision that face home owners. It is a decision that if not executed properly could leave a homeowner with 2 mortgages and lots of stress. Owning two houses sounds like a great real estate investment but not when one is a home and another is a house you are trying to sell.
This is the case with a neighbour of ours who is living the stress yet fails to see the problem, is the price of the house. Typically in the UK we would sell our home first with a reasonable closing date and then look for a new home to purchase.
Research Before You Buy
What to do when buying your first home? That’s easy, research! Talk to professionals and get tips and advice so you aren’t heading down a path where you want to tear your hair out. The same goes when you’re looking for things to do when selling your home, research.
When I sold my home I did my research first, granted I wasn’t buying a second home I was moving to Canada. I had estate agents come around and value my home and I averaged the values out to come up with a middle ground. My home sold in less than a week.
The Best Buying and Selling Option
I find in Canada it will go many ways, sell first with a long closing leaving the window to find a new home which would be optimal to me. There are some advantages to selling first and the most important is that the home has sold. Secondly, you know how much money you can work with when it comes to selecting a new home or building in your price range.
We had friends who sold their home and moved into a rental unit while their new home was built. They said all they cared about was making sure the house was sold first so then they could worry about building the new home with peace of mind. Renting was the better option for them and worth every penny.
Condition Of Sale
The other option I’ve heard of is to buy first with a condition on the sale of the new home that you sell your own home in a specified time frame.
As a home seller I likely wouldn’t care for that condition of offer because I don’t want to have to wait for someone else to sell so I can get out of my home and move on. It begins a chain reaction of homeowners all waiting to sell and move which is not only stressful but time-consuming for all involved.
When we bought our home we had no conditions at all which made the process easier however we went from renting to buying which is an even better perk when buying because you don’t have to sell anything just give 30-60 days notice to your landlord.
We didn’t jump in and buy our first home we went to many open houses but we knew there was a certain process to buying that would benefit us. The same goes when we opt to sell, we will follow the best option in order to remove being stuck in the middle of one house and a new home.
Take What You Can Get
There are also those that sell first but with a short closing because it may be the only potential buyer that’s come along so they took the deal. If looking to sell your home fast is on the table don’t make mistakes that are easily avoided. If the market is slow or if you’ve got an overpriced home it may sit on the scene for a long time. Some people will throw in the towel and take what they can get if an offer comes in that is reasonable.
I think homeowners need to be ready and realistic when it comes to numbers. If you believe your home is worth x amount of dollars that doesn’t mean it truly is. It is only worth what someone is willing to pay. If you are asking yourself why your house has not sold after 3-6 months up to a year you know it’s overpriced.
This may leave them with not enough time to look for houses so renting or moving in with friends and family may be a secondary option until a new place is found. If it were me I’d rather be a seller who has sold their home and has to find a new home. When you sell a home you remove a huge burden from the entire process.
Sometimes the circumstances aren’t always optimal but having the money in the bank from a sale seems the smarter way to go. You can buy a home faster than sell a home especially if the market is right.
Not All Homes Are Created Equal
I know some people who throw a wobbler because other houses on their street sold for more but they are not comparable. They believe because if one house sold for $700,000 theirs must be comparable and that’s how much their house should sell for if not higher.
They automatically assume they will sell and get that same kind of money but are devastated when reality kicks in. Not all homes are created equal even if they are on the same street.
Take for instance, size of home, land size, upgrades, landscaping etc. You can’t just slap prices around when it comes to home selling and I’m not even a real estate agent, that’s common sense. Another reason why for sale by owner can be tricky.
You really need to know your home’s value in order to sell and understand your MPAC assessment on your home. If you buy a house that doesn’t have a real estate agent who gives the house a proper assessed value you may end up overpaying.
Even if you sell your own home you can get agents around who are willing to give you an estimated value based on professional experience and training. Not all homeowners agree with agents and in some cases want the house listed higher. Another scenario is when homeowners undervalue their home when the do for sale by owner leaving themselves out cash and the buyer celebrating.
Jumping In With Your Eyes Closed – Two Mortgages
Then you have the buyer who purchases a new home without selling their home with a reasonable closing date. I don’t see the rush with this scenario but for some they don’t want to miss out on their dream home so they jump in head first and hope for the best.
This is the least desirable scenario in my opinion as now you are left to sell your house and you own a second home.
What happens if the market is saturated in houses and your home does not sell?Typically come spring and summer home selling is ramped up with many houses for sale and in some cases less buyers, a buyers market. Your home may not sell for the price you want or in the time frame you desire.
What if you didn’t do your research and you over price your home and no one wants to buy it? I had estate agents around to value my home it was critical to the success of me pricing my home and selling it as fast as I could with a decent profit.
Don’t Count On It
You may count on the amount of money you want to list and sell your house in order to purchase your new home but that’s not a smart thing to do. If you do have agents around don’t just take the agent who will list your home for the highest amount. Not all agents are created equal as well, money is a driving factor.
Learning The Hard Way
You will see below our neighbours are in a sticky position because they were more worried about a pool than the overall picture, their finances.
We live in a fairly mid-high-priced area of our city with homes nearing the million dollar mark. Homes in our area range in age from 10-25 years of age and some of them are new because you know how builders like to squeeze every inch of land possible in subdivisions.
We are not right in town, rather a 15 minute drive to get to the town centre where all the shopping and spending money happens. It’s an established area on one part and up and coming in another because many people want to get away from the business of the city but don’t want to move too far away from it.
For this reason, homes don’t go on the market often and when they do they don’t last too long. There are however instances when that statement gets thrown out of the window.
A particular home in our area sat on the market for one year because they thought their house was more than it actually was. I know they say there is a buyer for every home, but not every buyer is an idiot and will overpay in an area where we are unless their was some sort of bidding war.
It wasn’t until finally this year they lowered the price of the house from $619,000 to $579,000. This house price did not drop all at once. It happened once about 6 months in and then again at the 10 month mark where the price was at $579,000.
The home boasted a huge in-ground pool although nothing was updated and it was on a main road. The biggest set back and another reason why it took so long to sell was that the pool was jammed up at the fence in the back without much property left. You can imagine the pleasure of the neighbours who finally noticed the “SOLD” sign on this property, that and the homeowner.
Neighbours and The Pool
Another home around the corner on a mid-range priced street came for sale right at the same time with a full length in-ground pool. The property was pristine and well cared for.
That house had an asking price of $579,000 with 2000 sq feet, a larger lot than the previous home above and a fully finished basement. It sold in one day with a “For Sale By Owner” sign.
Here’s where the story gets interesting and “wants” may cost a family more than they bargained for. All this because they were in such a rush to become pool owners before the summer. Amazing what you can learn just by talking to your neighbours. You can also learn not to make the same mistakes as they are. Read on.
The house was purchased by a couple on the same street. The mother is a stay at home mom to 3 kids so the pool was enticing. When speaking to her she said they wanted the pool for the kids as their current home didn’t have room for a pool.
They bought the house on a whim and called their realtor the next day to list their home for sale. They were under the impression that since most homes on their street sell for around $550,000 – $650,000 that their home would be worth just as much as the new home they bought with the pool.
They listed their home for $619,900 which has no bells and whistles a smaller property and is not near as pristine as the larger home with the pool. She told me the idea was to sell their home for around $35,000 more than they purchased the new home with the pool they just bought. There was no real estate agents fees involved with the house with the pool sale so those costs were eliminated.
They were aiming for around a $30,000-$35,000 profit above what they paid for the new home. That money would ideally pay for most of the realtor and other legal fees. The problem is when you are holding on to two mortgages your profit line plummets and fast.
In their heads they thought they could make a smooth transition over to the new home, keeping the same mortgage and all realtor and legal fees paid. I thought at that point that they were trying to be very frugal and silly at the same time. It was simply not realistic. The new home is worth more than their house for sale.
Well, they moved part of their belongings into their new home at the end of April. They get showings on their house since they’ve dropped the asking priced to $599,000 but I reckon it’s worth $569,000. Having two mortgages can really push you financially in directions you don’t want to go but are forced to in the end.
I’m guessing it will sit on the market until they lower the price. At least they are enjoying the pool. Every time we walk around on the weekend there are plenty of cars parked outside as it’s the summer party depot now. I’d love a pool for the same reason, hot days and cooling off in the pool with friends and family.
That was not the brightest idea doing what they are doing because now they have one house, one home and a pool with two mortgages that she said they can’t afford. They need to sell their house as one income will not cover two mortgages, take care of the family and pay the bills. Maybe she can tell her cleaning lady she can stay home for a while.
She knows they have to lower the price but they keep thinking that there will be a buyer. I hope they come to their senses sooner than later because it’s summer now and there are many homes for sale. They are making a huge money mistake in my opinion. All of this, just for the pool. I’m sure they could have waited until they sorted money matters out first before jumping the gun.
Owning two homes sounds like you’re on your way to becoming a property mogul but carrying two mortgages will suck the money out of your bank account quicker than you know.
You will get little in return when you eventually sell the original home as most of the payments of two mortgages will be interest. How much is that pool going cost if the house sits on the market for a year? I’m sure that money could buy quite a few flotation aides for the kids but you might need something more buoyant than a multi-coloured noodle to hold up your finances.
When deciding whether to buy or sell first research all of your options so you don’t get less the optimal results when you make your move. Be smart, be realistic and don’t get caught up in the stress of owning a house, a home and two mortgages if you can work around that.
Discussion: Have you made any mistakes in real estates specifically holding on to two mortgages because your house wouldn’t sell?
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