This is one of the biggest questions facing downsizers and homeowners planning their next move.
Unfortunately, there is no single correct order.
Buying first can give you time to find the right home without feeling that you must settle. This can be especially helpful when you are looking for something specific, such as a bungalow, an accessible home, a particular condo building, or a property close to family.
The risk is that you may own two homes temporarily. You also need to know whether you can qualify for the new purchase before your current home sells.
Selling first gives you certainty. You know how much your home sold for, how much equity you have available, and the date by which you need to move.
The risk is that you may feel pressure to find your next home before the closing date. That can lead to rushed decisions or the need for temporary accommodation.
Consider a Kingston couple moving from a larger family home to a bungalow.
They may have substantial equity, but most of that money is tied up in their current house. Before buying the bungalow, they should understand the realistic selling range for their existing home, how long it could take to sell, and what would happen if it sold for less or took longer than expected.
They should also speak with their lender about financing and bridge financing.
Bridge financing is a short-term loan that may allow a buyer to access some of the equity from a home that has already sold but has not yet closed. It can help when the new home closes before the old one. It normally requires a firm sale agreement for the existing home and lender approval.
It is not a solution for every situation, and it does not remove all the risk.
Deposits also need to be considered. A buyer may need access to a significant deposit before the money from the current home is available.
Closing dates can sometimes make the process easier. A longer closing date, a carefully coordinated closing, or even a brief period in temporary accommodation can provide more flexibility and reduce pressure.
Conditions may also help, depending on the property and the strength of the offer. However, a condition on the sale of the buyer’s existing home may not be attractive to every seller.
Before committing to either order, homeowners should answer a few practical questions:
Can we qualify to buy before selling?
Where will the deposit come from?
How quickly is our current home likely to sell?
What happens if the sale price is lower than expected?
Could we carry both homes for a period?
Do we have somewhere temporary to stay if needed?
A lender, real estate lawyer, and REALTOR® should each review the parts that fall within their area of expertise before you make a firm commitment.
The best plan is the one that protects your finances while giving you a reasonable chance of finding the right next home.