McClelland Minute - November 29, 2009

Should I Sell or Buy First?

The family is growing, their needs are changing, and you want to trade up – should you make an offer on the next home or list your current house for sale first?  The answer is … that depends -how many homes are available in the part of the market you will be looking in, how flexible are you, and what is the more important goal, the sale of your current home or the purchase of the future one?

Most times there are a number of houses in a city that will meet your needs.  However, if you want to make the transition from city to country when quality acreages are in short supply, you may want to consider the possibility of an interim step such as renting or moving in with family while the bulk of your possessions go into storage.  Trust me, there are always alternatives to being homeless!

Now comes decision time.  My recommendation is to list your property “subject to the vendor finding suitable accommodation”.  Personally, I have never had a client lose a sale because a buyer wouldn’t wait a reasonable period of time for it.  They won’t be there forever, but most will be patient three or four weeks before an actual possession date is fixed.

The big result is that it is usually less stressful financial wise.  You know exactly how much capital is available to invest in the next home and there is only one mortgage to worry about, not two.  Secondly, since you are moving anyway, go through your home in a disciplined way so that moving out quickly is a seamless effort.  Third, and this is a bonus for being proactive, when you make an offer on that next home, you can do so “subject to completing the sale” of your present home.  In effect, this makes you a cash buyer in the mind of that seller, and you will likely be able to negotiate a better price or terms.

Now if you absolutely don’t see yourself selling before knowing specifically where you are going to land next, and can’t afford the burden of two mortgages, then your offer will have to state “subject to the sale” of your present home.  Two things will likely occur.  The vendor will make you pay closer to their asking price; after all you are seen as a relatively weak buyer by them because you actually can’t complete the sale in a timely manner.  A wise vendor will also ask for an option clause. 

This is a pre-established period of time, often 24 or 48 hours, which can be imposed by the vendor at any time that requires you to step up and remove all remaining conditions of the sale – financial, inspection, etc. or step aside.  Essentially this gives the vendor the right to continue looking for a better buyer than you; marketing the property and entertaining offers.  A vendor doesn’t have to explain their reasons for exercising their rights under the option clause.  I have also seen vendors not take this step because of personal relationships with the buyer.

Either way, it is best to discuss your particular circumstances with your Realtor so that the path you choose doesn’t contain any surprises.

Vern McClelland is associate broker with RE/MAX of Lloydminster.  If you have questions or comments on this article or other real estate matters, he can be reached at 780.808.2700 or through the McClelland Group website www.mcclelland.ca

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