In part three of our three part series on Should I Buy Or List First?, we explore the pros and cons of drafting a conditional offer on a property. In case you missed part two of our series here on buying your new home before selling your current property, click here.

Strategy #3: The Conditional Offer

The third option at your disposal when deciding whether to list your current home before or after purchasing your next home is to draft a conditional offer (also know as a subject-to-sale offer).

Unlike strategy #2 (buy first, sell later), whereby you commit yourself unconditionally to the purchase of a new home prior to selling your existing home, with a conditional offer, you are only committing yourself to purchase your new home if your existing home sells by a specified end date.

While the conditional offer strategy sounds almost too good to be true, it falls short in a few different ways:

1. There is typically a clause in this contract that allows the seller to continue to market their home even after the conditional offer has been accepted. During this time the seller is able to entertain offers from other bidders. If the seller wishes to pursue any of these other offers prior to the sale of your home, he has the right to do so, but must give you the right of first refusal. If your current home has not yet sold, you will be forced to walk away from your purchase unless you are willing to shoulder the prospect of holding two properties (and mortgages) at once.

2. Sellers typically view conditional offers as “second rate”, and in many cases will only entertain them if their property has been languishing on the market for some time. In hot real estate markets, the likelihood of having an offer accepted with a subject-to-sale clause present is very low. In order to compensate for the inherent unattractiveness of these sorts of offers, buyers must often offer a generous price premium in order to attract the attention of sellers.

In a lot of ways, the conditional offer is the middle ground between the other two options we’ve discussed in this three part series. While on the surface it appears to be a good solution for those who are unsure of whether buy or sell first, in reality, this approach lacks the clear advantages that the other two strategies confer. The fact that another buyer can show up at any stage of the process and “bump” a conditional offer means that you might have your heart set on a home that another purchaser can easily fly in and snatch from under your eyes.

If you have questions about the market or would like to discuss anything mentioned in this article, feel free to send me an email or drop me a line—I’d love to chat. I’m a Vancouver Realtor who is an expert in residential real estate and sell extensively condominiums, townhomes and detached homes.

In part two of our three part series on Should I Buy Or List First?, we explore the pros and cons of buying your new home first, and then working under a fixed timeline to get your current home sold. In case you missed part one of our series here on selling your current home first before going ahead with your purchase, click here.

Strategy #2: Buy First, Sell Later

The “buy first, sell later” strategy definitely isn’t for the faint of heart, but when the stars are aligned and this strategy pans out, the benefits are great!

Typically, the types of individuals who opt for the buy first, sell later strategy are those who are interested in purchasing a new home that is so unique or so remarkably well-priced that it’s a true rarity to find on the market.

If you’re unsure just how unique the home you’re looking for is, your Realtor should be able to conduct a retrospective sales analysis for properties matching your search criteria in your target neighbourhood to see how regularly they come available. As a rough rule of thumb, if less than four listings matching your criteria come available within a calendar year, the property you’re looking for is probably unique.

While striking when the iron’s hot always has its allure, it’s important to also keep in mind the obvious downsides that come with this strategy. Namely, if you commit to purchasing a property and are unable to sell your current home on the schedule you had initially forecasted, you might be in a position where you hold title to two properties concurrently. Are you in a position where you would be able to shoulder two mortgages at the same time? Even if a lender was willing to extend that much capital to you, how much stress might a double mortgage payment every few weeks cause you? What impact might this stress have on other aspects of your life or your other financial goals?

There is always a component of luck when it comes to home sales. Despite the best efforts of your Realtor, even the most brilliantly marketed home offered at the most competitive price might not sell if the “right” purchasers aren’t out shopping the market. Of course, by reducing the list price of your current home further you might be able to stoke up some buyer demand, but no one likes having to sell their home at a loss—especially when the market is hot!

In short, if your finances are tight and you are even somewhat prone to worrying, the buy first, sell later strategy probably isn’t for you. However, if you have some extra capital on the sidelines and you are willing to shoulder the possible financial storm to land just the right new home, the pay offs from this approach can be great.

Read Should I Buy Or List First? – Part III now!

If you have questions about the market or would like to discuss anything mentioned in this article, feel free to send me an email or drop me a line—I’d love to chat. I’m a Vancouver Realtor who is an expert in residential real estate and sell extensively condominiums, townhomes and detached homes.

One question I routinely receive from homeowners who are looking to both sell their existing home and purchase a new home simultaneously is: Where do I begin?

That is to say, these homeowners are seeking direction as to whether they would be better off to first find a new home that matches their search criteria before placing their existing home on the market for sale, or if they should sell their current home and have the cash from that sale in hand before the begin their search for their next home.

While there is perhaps no one universal answer to this question, in this three part series we will explore the pros and cons of:

1. Selling your current home first, and then starting your new home search;
2. Buying your new home first, and then working under a fixed timeline to get your current home sold, and;
3. Drafting a conditional offer on a new property that’s contingent on you selling your current home by a certain date. In this scenario, if you are unable or unwilling to sell your current home by a certain date, you are no longer compelled to complete your purchase.

While drafting a conditional offer appears on first blush to be the most preferred option, as we will see, this strategy (much like the other two) also comes with its fair share of shortcomings.

Strategy #1: Sell First, Buy Later

For many homeowners, the “sell first, buy later” strategy is the preferred option.

The beauty of this strategy lies in the fact that by selling your home first, you will have a firm sense of exactly how much cash you will have in hand before you even begin your subsequent purchase. If you are the sort of person who is vigilant about living within your means, this strategy will suit you well. By having a firm sense of your affordability from the moment you start your house hunt, you will be able to quickly sift through prospective homes as either being within your means or not, and have a firm basis for your negotiations with sellers. This confidence in your tactics will allow you to outcompete many other prospective purchasers who are less sure about their financial position and vastly increase your chances of having your bids be successful.

Depending on market activity and your own personal motivations, you might be inclined to come forward with an unconditional offer on your new home. In certain segments of our housing market sales figures have been so strong that, homeowners will now only entertain conditional offers. By having cash in hand from your previous home sale you will be in a position to compete with developers, investors, and other parties who have no qualms about coming forward with unconditional offers.

While generally the “sell first, buy later” strategy seems quite appealing, where it falls short is if you have not found your next home by the time you’re required to vacate your current property, you might have to seek temporary accommodation. Generally speaking, homeowners in the Vancouver market have between one and three months between the time of contract signing and the new owners taking possession of their home, which is sufficient for most folks to sleuth out their next home—provided that they have a clear understanding of their buying power and overall housing stock availability.

Read Should I Buy Or List First? – Part II now!

If you have questions about the market or would like to discuss anything mentioned in this article, feel free to send me an email or drop me a line—I’d love to chat. I’m a Vancouver Realtor who is an expert in residential real estate and sell extensively condominiums, townhomes and detached homes.

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