Purchasing a new home can be a challenging and risky business, with important decisions to be made, says Alastair Marshall
There are two main objectives which need to be addressed when buying a home; finding a property which meets your needs, closely followed by working out how you are going to finance this new purchase. Add in the requirement to sell your existing home and you’re potentially faced with the challenging situation of being in the middle of a property chain.
So, is it better to sell first and know that you have the finance for purchasing in place, or should you find your ideal home before marketing your existing property?
The positives and negatives of both approaches, and other important factors, are examined below.
Option 1: sell before you buy
This is generally less risky. The main advantage is that you have greater certainty of your ability to fund your purchase which makes you more attractive to sellers than buyers who haven’t sold, improving your bargaining position.
The downside is that if you can’t secure a suitable new home quickly, with a date of entry to match your sale, you have to be prepared to cover the costs of renting and storage which will erode your purchase fund. If, for example, you have a very specific type of property in mind or perhaps a young family for whom you wish to minimise the disruption of multiple moves, selling first may not be a practical route to take, and may not be the recommended option in a sellers’ market anyway.
Option 2: buy before you sell
With bridging loans only being available in limited circumstances, and often prohibitively expensive, securing a purchase dependent on your own sale requires an accommodating seller who is willing to wait for you to sell in order that the settlement dates can coincide. This is the ideal scenario.
When accepting an offer which is conditional on a sale, the seller will typically (usually on the advice of a selling agent/solicitor) require the setting of a review period of around one month at which point the progress of the connected sale will be examined. From there, a decision will be made by the seller on keeping faith with the current buyer, or returning the property to the market, pending the buyer’s sale progressing, if the feedback on the connected sale isn’t encouraging.
The risk with this is that, should your sale not go to plan, you are faced not only with losing the property which (in your mind) is already yours, but also bearing the financial costs of your unsuccessful purchase and sale transactions.
To navigate your way through either approach it is vital to seek professional advice from an adviser who understands the conditions of the specific market or markets in which you are selling and buying, particularly if moving from one area of the country to another. Not only can the difference between selling in a buoyant, fast-paced market and a more static climate be marked but, factors such as the traditionally stronger times of year for selling will have an influence on the process as well.
A good selling agent/solicitor will also ask all the pertinent questions of prospective purchasers as part of their due diligence so that the most complete picture of the funding position is established.
When a property chain involves a large number of parties, a clear understanding of the requirements and critical deadlines which apply to the participants in the chain is crucial. Effective communication between solicitors or buyers and sellers direct is one of the keys to the chain holding together.
Obtaining advice on the estate agency and legal work required at the outset is also essential. Too often title issues or, more commonly, the absence of full local authority certification for alterations to a property can delay the conclusion of contracts and spread anxiety across the chain, particularly if revised settlement dates have to be proposed as a consequence.
Every chain of transactions will inevitably involve a variety of different elements which need to align but, by combining the engagement of a willing buyer and a willing seller with the advice of an experienced professional, steering your way through what can be a daunting process will have a greater prospect of achieving a successful outcome.
Alastair Marshall is a senior solicitor, Murray Beith Murray