When it comes to moving house, homeowners typically sell their current property at the same time as buying a new one. This is often the simplest, most cost-efficient option. But this approach has its downsides – most notably the fact that it creates a property chain.
For this reason, some people prefer to either sell before they buy, or buy before they sell. Both of these options come with risks attached, but they can also offer significant advantages if you’ve got the time, money or patience (or potentially all three). In this in-depth guide, we discuss the advantages and potential risks of these alternative approaches to selling your house.
The advantages of selling before you buy
Selling before you buy can put you in a strong negotiating position. Because you’re under no obligation to make a quick sale, there’s no pressure to accept a cut-price offer – you may even end up with a better price if you find a buyer who’s keen to move in quickly.
There are further benefits when you’re ready to buy. You’ll potentially have pocketed the cash from the sale of your previous property (or arranged a pre-approved mortgage), which could give you an advantage over other potential buyers. There’s a good chance the current owner would prefer selling to you, a cash buyer, than accept an offer that’s contingent on another property being sold. Not only does this make it much less likely that you’ll be gazumped, but it could also help you to get a lower offer accepted if the seller is looking for a fast turnaround.
Additionally, you’ll have the clearest possible view of your own budget. Because you’re not dependent on achieving the asking price for your current property, you’ll know exactly how much you can spend on a new house.
What are the risks of selling before you buy?
Of course, this strategy also has its potential downsides. For any number of reasons, it may not be possible for you to buy a new house soon after selling yours. You might not find a property that you like, or the existing owner may be holding out for a higher offer. This means you’ll need to live somewhere else in the interim – either renting or staying in a hotel – which can take its toll over time, both financially and emotionally. You’ll also have to go through the process of moving house an additional time, with all the frustrations that this can entail (not to mention the costs of hiring a removal company, paying for an end-of-tenancy cleaner, reconnecting utilities, etc.).
The advantages of buying before your current house is sold
Perhaps the biggest benefit of this approach is that it eradicates the potentially irksome interim period between selling your old house and moving into the new one. The new property is already yours, ready and waiting for you to move in at your leisure. This is particularly advantageous to homeowners with young families; the thought of moving house twice in a short amount of time, with young children in tow, could persuade you that buying before you sell is the best option.
Furthermore, if you’ve already found your dream home at the perfect price, this approach guarantees that you won’t miss out.
What are the risks of buying before you sell?
Unsurprisingly, the biggest problem with buying before you sell is that you’ll need the financial capability to do so. Relying on bridging finance effectively leaves you encumbered with a loan over two properties until your existing house sells, which can be expensive.
Assuming that you have sufficient capital to buy without relying on additional lending, there are some other noteworthy risks to bear in mind. Perhaps the biggest is that the pressure of securing a fast sale may convince you to accept a lower-than-wanted offer on your previous property. It also leaves you particularly susceptible to unforeseen fluctuations in the housing market; if the market is slow, it may take more time than anticipated to sell your original house.
Want to learn more about the process of selling your property? Read our in-depth guide: How to Sell Your House
Advice for selling a house before buying a new one
Of the two options detailed above, selling before you buy is the most common. If you’re looking to move house and like the sound of this approach, be sure to follow these pointers:
Do the groundwork before you sell
You’ll have time on your hands between selling your original property and buying the new one, so make sure you use it wisely.
Before you commit to selling, strike up a good relationship with your estate agent – you’ll be needing them again when it’s time to buy. Do as much research as possible; decide where you want to move and the sort of home you wish to purchase. Most importantly of all, try to get a pre-approved mortgage, as this will save you a significant amount of time and effort down the line.
Consider investing your equity
If there’s a relatively lengthy period between selling your original property and buying your new one, you may find yourself spending a significant amount on temporary accommodation (whether renting a house or staying in a hotel). It’s possible to offset some of this cost by investing the equity from your sale (although this is probably only worthwhile if you have a sizeable amount of equity and a decent length of time – potentially a year or longer – over which to invest it).
For instance, if you’ve paid off about half of the purchase price of your original property – around £115,000, based on the UK’s average house price – you could generate a return on this amount before purchasing your new home. Say you earn 5% on that sum over the course of a year; this would net you almost £6,000. However, this approach is far from a guaranteed money-spinner. If house prices were to rise by 6% over the same period, you’d find yourself out of pocket overall.
How Much is Your Property Worth?
Get a FREE instant valuation
Correct at time of publication (16th September 2019). The views and opinions expressed herein are those of the individual contributor and do not necessarily reflect those of the Chancellors Group of Estate Agents Ltd or its subsidiaries. References to legislation, best practice and other matters with legal implications such as fees, rules and processes are included for information and editorial purposes only and are not authoritative, nor should they be interpreted as advice. When in doubt you should only take advice from an industry professional or solicitor where appropriate. E&OE.