Buying and selling a home at the same time

When it comes to moving into the next home, most buyers are faced with the prospect of selling their existing home in order to make the move. Gone are the days of easy access to bridging finance, and buyers often ask us;

“How do we do this?”

In a stable market, the process is relatively straight forward. The buyers can either choose to sell first and then shop with the security of a known settlement date and a firm deposit in their hand,or they can locate their ideal property and purchase with a long settlement in mind, giving themselves an optimum timeframe to sell.

But in this current market it’s not so straight forward.

When a market is either rising or declining, any buyer who is transitioning from one home to another will be conscious of the impact of a changing market.

In an positive trending market, the fear for many vendors is that they could sell in today’s market and purchase months’ later in an inflated market. The value of every dollar could be deflated if the time taken to buy a new property is longer than anticipated. If they choose to buy in today’s market and then face a subsequent sale at a later date they could sell advantageously, but then they add pressure to the picture by putting themselves in a situation where they must meet a particular settlement date (or settle before their purchase settlement; which will mean that sourcing temporary accommodation becomes a new task).

In a declining market, the tables turn the other way. A vendor may choose to sell first and wait it out for their sale before purchasing in a more opportunistic market. For many though, the temptation to buy as they see sale prices being discounted and days on market extending can grip, but the advice we give relates to factoring in the impact of a tougher market when it comes time to sell their own home. We lean on conservative sale price estimates.

Battling a sale in a tough period is hard, but battling a sale with a finite settlement date to match is stressful.

The biggest challenge for upgraders, downsizers and those who are shifting to a new area in this market relates to timing.

It has become very difficult for buyers and sellers to identify where the point of a market shift will be. As they say, “nobody rings the bell when the market reaches the bottom.” The only way that we can identify when the market has turned for the better is once prices start to increase again. At that point, we can identify when the market actually bottomed out.

When buyers and sellers speculate about the market and try to time an advantageous trade-up, they introduce a new layer of risk.

If their expectation of market movement is correct, they will effectively sell at a stronger price than they buy at.

If their expectation is proved wrong however, they may find that they have lost some wealth in the trade due to a market fluctuation; much the same as a currency decline can cost a buyer when dealing internationally. If they sell in a down-market and then find the market starts to increase while they are shopping, they’ll wish they didn’t try to time the situation after all.

Losing a place on the ladder due to bad timing is never a happy event.

The best way to insulate from this is to time the purchase and sale as concurrently as possible; to trade in the same market.

This involves a lot of organisation and will require consideration of quite a few elements;

• How to effectively market the property to ensure a prompt sale
• What conservative estimates to rely on when calculating the cost of the ‘trade’
• When to start shopping
• How to introduce flexibility into settlement dates
• Where (or who’s house) to stay if there is a gap between both the sale settlement and the purchase settlement

We have helped buyers transition for years and some of our client’s adventures have been impressive when it has come to merging the settlement dates effectively. One family received an offer on their house for a settlement some seven weeks’ ahead of their purchase settlement date. They were bound for a family holiday around Europe and quite anxious about the prospect of a shorter-than-planned vacate date. We told them to pack their things, vacate early, put their belongings in storage for seven weeks, enjoy two nights in a hotel and then fly out with a million dollars in the bank and no mortgage.

We are currently working with a lovely couple who have had a flexible settlement offer on their home. The buyer has enabled them to shop carefully for their next home and has given them the confidence that they can flex within a specified date range when the vendor finally signs a purchase contract.

The process is intense but it doesn’t have to be stressful.