Anyone who’s ever bought or sold a property knows it takes time – at the moment correctly priced properties in South Africa spend an average of 3-to-5 months on the market (according to a recent Lightstone Property Residential Mortgage Market Overview), and once sold it takes about another 3 months for the transfer to go through.
So, should a seller sell their property before buying another, or buy the next one first, before selling the current one?
“It’s the eternal question”, says Bruce Swain, MD of Leapfrog Property Group, “both options have their own advantages and risks, but all things considered I’d generally advise selling before purchasing another home”.
The risks of selling before you buy
Swain believes that the risks of selling before buying another property are more manageable while the advantages are more beneficial.
“Essentially there are two risks when selling your property first: you might find that you’re not able to find and buy the right property as quickly as you’d hoped and while you wait you may need to rent (which is an added cost). Secondly you might find that prices have gone up in the interim and that you’re now not able to buy into a higher or even similar price bracket as before”.
These risks can be avoided by carefully managing the sale of a current property – it’s possible to extend the settlement date of a property in order to have enough of a time buffer to select and purchase a new property.
The advantages of selling first
Swain lists a number of reasons why it’s in a seller’s best interest to sell, and then to buy which include:
· Putting the seller in a stronger position when buying as he or she will have the funds available to purchase a new home – something that’s increasingly attractive to both buyers and mortgage lenders (as the uncertainty around the local economy increases more and more banks are asking for larger deposits).
· Because the seller doesn’t need to make a quick sale (in order not to pay two mortgages for example) they won’t be pressurised into selling cheaply.
· Having time also puts the seller into the stronger negotiation position.
· Sellers will know exactly how much they can spend on a new property and won’t be dependent on getting the right sales price (to fund the property they’re already in the process of buying).
· If prices are falling, then houses get more affordable as you wait
While no strategy is fool proof, there are a number of things sellers can do to ensure that they don’t end up having to rent while the transfer of the new property goes through, or lose out as the property prices start going up and they can’t afford a similar property any more. Swain believes that the most important moves are to:
· Do proper research – it’s imperative to know what the current property is worth and, based on where the seller wants to move to, what’s available in the chosen area within that price bracket.
· Get pre-approval for a new home loan – this can save valuable time.
· Slow down the selling process by agreeing to a longer period between agreeing to an offer and completing the transfer process as this allows valuable time to find a property and for that transfer to be completed.
This article “Timing A Property Sale” was issued by Leapfrog Property Group – http://www.leapfrog.co.za/