The Catch 22 – Selling or Buying first?

One of the biggest fears we hear from people thinking about selling is “what is out there to buy?” and “it’s so hard to buy with all the competition from other buyers” taking into considering the low numbers of properties for sale.   It really is a catch 22 situation.

We know that because buying is so hard, some sellers have already given up on even trying to sell their properties, which in turn creates even more pressure on the buyers, with less houses coming to the market as a result.   It is a basic supply and demand scenario, and if everyone came to the market without the fear of buying then there would be a lot more choice of properties to purchase. 

What are your options?

Buy before you sell

Bridging finance could be an option, and with a longer settlement date you may not even need to bridge the full purchase price, just the deposit.   However this still may prove to be too expensive as you will be paying interest, possibly on the full value of your purchase, until such time you existing property settles.  If you cannot bridge the full amount, but can pay a deposit then you could look at longer settlement date, giving you time to sell your property.  This is perhaps a lot risker, as if you don’t sell and settle by that date, you will need to settle on your purchase.   

The risk is mitigated somewhat by the fact the current market is good, and generally properties are selling quickly, the only danger being if you anticipated a higher sale value than what the market will pay.   We do understand this is not an option for everyone, and is something that needs to be considered carefully, taking into account how well you cope with this kind of stress.

The market is rising, and if it continues to do so, you will then have the capital gains on 2 properties while you are selling your current property.  This can possibly also help mitigate the cost of bridging finance interest.

Sell first but with a long settlement date

This is not at all difficult to achieve in this market, as the seller is in a strong position and able to dictate some of the terms.   The vast majority of buyers do actually find a property to purchase within 3 months in our experience.  However the pressure to buy something quickly can be driven by the fear the market is rising and if you don’t buy now, you might have to pay more if you delay in your purchase.   

Buying subject to selling

This can be very difficult to achieve in this market, especially if there are multiple offers on a property.   Even if your offer is accepted, most agreements will include a cash-out clause allowing the vendor of the property you are trying to buy to accept a cash offer and your offer would be cancelled. This puts you under enormous pressure to sell to the first offer that is made on your property.

Conclusion 

One of the main themes is give yourself time, longer possession dates when selling or buying takes a lot of stress out of the process.  We recommend you do involve your solicitor before making decisions about buying and selling.  Helpful guides can be found here https://www.settled.govt.nz

Recently we met a retired couple that did not know even if they could afford the next house after selling their family home of 40 years. We provided them with an appraisal so they could get a good understanding of the value of their current home. Even more importantly we provided them a list of houses that had sold in the last 3 months for where they wanted to buy, and the price range they could afford. They were surprised at what they could have bought because they assumed houses were selling for $50,000 more than their stated price. 

So the end result is they are now confident they can sell their current home and buy and have put plans into place to get their house ready for the market. 

If you would also like advice, specific to your situation, please get in touch. 

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