So you have to sell your house, and in turn, have to buy a house – again! You may have recollections of the time you first bought the house, and may be worried to go through the stressful experience yet again. But wait! We are here to lend a helping hand. If you have decided that you are going to buy and sell the house around the same time, then we have some tips from experts in the industry, and some tips and tricks that would help you make the journey easier for you.
So, buckle up, and read on!
Where To Start? Buying or Selling?
When we said buying and selling at the same time, we meant around the same time. It is of course, impossible, not to mention impractical, to close the deals of buying and selling on the same day.
That, clarified, the question arises: Where to start?
Doing either one of the job of buying or selling a property can be exhausting, and you may be scared to be handling both of them at the same time. How do you go about it? Do you buy a house first? Or do you close the deal on selling your house first? Well, let us start with a list of pros and cons of doing each of these, so that you get an idea of what you are in for.
The Advantages and Disadvantages of Buying a House Before Selling
Buying a house before selling it gives you the advantage of having a clear head while looking around, as you are not rushed into buying one, and you can therefore make a better choice. You will be free to look around at your ease, without the stress of having to move. The best part is, you can even time the buying and selling of property, so that you buy when the market is fit for buying, and sell when it is fit for selling. In many ways, buying a new house before selling your current house is better when it comes to reducing stress. On the other hand, when you close the deal on your new home, you would have to sell your house fast because…
With buying a house before selling, there is the problem that if you buy a house that you get a great deal on, and you wait for the current house to sell, you will be paying two mortgages at the same time. This problem will not occur if your mortgage is paid off, but if it is not, you would certainly struggle with paying two mortgages at the same time. In addition to this, you would get a harder time qualifying for a new mortgage due to the fact that you will have a higher debt to income ratio. How does this work? Home Guides clarifies this here:
“To buy a house before you sell, your income will have to support both mortgage payments at the same time. If you’re struggling just to have enough income to qualify for the new loan without figuring in your old mortgage, you probably won’t be able to qualify with both unless you can find a lender that will allow a higher debt to income ratio.”
The Advantages and Disadvantages of Selling a House Before Buying
When you sell your property first, you have the advantage of knowing how much money you have to work with, and you can budget your expenses from there, and make a calculated choice in buying a new house. This way, even if you make the mistake of overestimating the price of your house, you can deal with it as you have not yet splurged your money on a new house.
Another benefit of selling your property in the UK before buying a new one is that you get the mortgage easily, since you are not tied down with paying the mortgage for the old home. However, you will also be left without a home for the period of time that you have not bought a new house, which brings us to…
When you sell before you buy a property, you make the risk of being homeless for a while. You can’t expect the deal to close when you predict it to, and the process of selling a house may take longer than you think. So what do you do in the meantime? You rent!
For some people, renting could be a worse option as they would have to shift all their belongings into the rented home, and then shift it all again when they finally buy a house. Since moving houses is a stressful job, the thought of moving twice in the same year would put off a lot of people. Also, selling your house before buying a new one means that, you have to make the choice of buying a house quicker, as your hard-earned money would be flowing into paying the rent every month. So the choice you make could be a spur-of-the moment one, triggered by the anxiety to buy a home quickly, and you may not get a better deal than you would have, had you bought a house first.
Which is Better For Me? Buying First or Selling First?
Now that we have discussed the pros and cons of each of the methods, here comes the real question: Which option is better for you? Understand that both these options have their own risks, and you need to be prepared for each of them, whichever you choose.
Who Should Buy First?
If you have already paid off your mortgage of the home you will sell, or can afford to pay off two mortgages, then buying before selling is the better option for you. It gives you the freedom to choose a house at your leisure, without any deadline hovering over your head, and you can have a look at many houses before you find the dream house.
For the people who have already chosen a house to buy, and have decided to sell it, they may need to close the deal on the new house before anyone else grabs it. They would also need to multitask, setting up their house on sale. In order to make it easier for them, they can simply use an online agent to help them out in this trouble. The agent will take care of selling your house fast in the UK market, and you can focus on getting the deal closed on the new house.
Who Should Sell First?
People who would rather NOT pay two mortgages at once should consider selling their house first before buying a new one. Of course, this means that they would have to spend money on renting a new place for the time they look around to buy a house, but it is definitely worth hassle. You will also get the mortgage for your new house easily, as you would not have the added debt of an extra mortgage to pay every month.
You should keep in mind that you would have to rent, so it is prudent that you find an apartment for your family or yourself while the deal is closing. If you are thinking about renting your house online, you can use these handy tips to help you out.
Things to Keep in Mind
No matter what you choose, to buy first or to sell first, you need to keep some things in mind so that you don’t fall into trouble later on.
Have a Contingency Plan Ready
If you choose to buy a house before you sell, you need to have a plan for the financials to take care of the mortgage. Make sure you have a plan ready for when things don’t go as planned.
Do Your Research Properly
You should research on the state of the market in the UK when you are about to buy or sell your house. A lot of things depend on whether the market is currently favouring the buyers or the sellers, and once you are aware of the situation, you can make a better plan to optimise your role as a buyer and a seller.
Strategies for a Buyer’s Market
When the market favours the buyer, as it is now, post-Brexit, you should definitely consider selling first, and buying a new house later. This is because you should get the harder part over and done with, which, in this case, would be selling a house. In a buyer’s market, selling a house would be difficult, so, if you buy a house first (which you will get fairly quickly), then you will be left with two mortgages to pay. And since it is the buyer’s market, you would face some problems and delays in selling, which means, you will be stuck paying for two mortgages for a long time. If you have second thoughts about being able to manage selling a house in a buyer’s market, here is a guide to sell your house during a fall in prices that will help you. Additionally, we are listing some helpful tips here, for your ease.
1. Check the Competition
Do some research and check out the prices around your neighbourhood and of the property like yours around the area. This will give you an insight about your competition and how you need to price your home. Your potential buyers will be looking at these prices as well, so make sure that you have done your research about the competition thoroughly, and the pricing you set for your house would be justified.
2. First Impression is the Last Impression
The curb appeal of your house matters a great deal. A lot. You need to ensure that the buyer is attracted to your house. No matter how much you have offering inside your house, if the outside is not great to look at, you might not get visitors frequently. And in a buyer’s market, that is the last thing that you would want. So get a makeover of your house and create a great first impression on your potential buyer. You don’t need to go overboard, though. Make changes that would be necessary, but don’t splurge all your money on it.
3. Put a Realistic Price
Putting a realistic price is the most important part while selling in a buyer’s market. You can use online tools like the Zoopla Estimate to figure out the price of your house. You can also discuss with an agent so that the price you settle on for your house will understandable for the buyers, and you can close the deal easily.
Strategies for a Seller’s Market
When the market favours the seller, we would recommend that you buy a house first, and sell the house later. Again, the reason is the same as before—you need to get the difficult part over with as soon as possible. Since you know that the market will favour you when you sell your house, it is best that you buy a house quickly, and then sell the house. This way, you will be safe. After you sell your house at a good price, you won’t have to worry about buying a house in a seller’s market, as you would have already done that, and you can move in your new home with a peace of mind.
If you are wondering how to buy in a seller’s market, then here are some strategies to help you out:
1. Be Prepared
In a seller’s market, there would be many people after the same property so you have to be ready to act quickly and to have the money at hand. Also, since you are selling your property as well, it is better that put up your house on the market, and be sure to communicate that to the seller of the house that you are interested in, so that they can be sure that they can single you out as the individual being able to pay them. You can also let the mortgage consultant contact the estate agency to confirm that the mortgage was in place. This will further improve your credibility in the eyes of the seller. Remember, there are many buyers in the market, and you need all the strong points in your favour that would help you stand out from the rest.
2. Research Online and View Only What You Want
In order to make the choice simple and easier, you should browse houses online and make a list of the houses that you like. Make a specific list, and make sure that the list only includes the properties that you would be interested in buying. Then visit the houses with the intention of buying. This will help you make a better choice as you would be already prepared to buy, and since it is a seller’s market, a little compromise on your part should not worry you too much.
3. Keep in Contact With Your Agent
Your agent is your friend in need. You need to keep in contact with them so that they can provide you information about any and every new house that is on the market, which meets your specifications of a dream house. Also, you might need the help of more than one agent in this case, since you need speedy information in the tough competition. A number of select agents would keep the stream of information coming to you, and you can make the choice of visiting the ones that you would like to buy.
Line Up Your Closing Dates
In order to manage both selling and buying, you need to coordinate the closing dates closer to each other, which means that you would have to multitask.
In the case that you are buying first and selling your house later, you should actively seek out houses, while preparing your house for sale in the meantime. This would be the best time to get the upgrades done to your house before you put it up on the market to sell. De-clutter your house, remove the personalisation, and make it a clean slate to allow viewers to imagine your house as theirs.
In the case that you are selling first and buying your house later, prep yourself for buying a new home. Make sure all the legalities are in place, your credit score is high, and research your options thoroughly. If you have made the smart move of selling first in a buyer’s market, then you would have a lot of options to choose from when it comes to buying a house. Be thorough in your research and choose to view the ones that you like. In addition to this, also do some research about the loans that you would need, in order to buy a new home.
Talk to Your Agent
Keep in constant contact with your agent. Your trusty agent knows about the state of the market, has probably experienced it before, and can guide you better through the difficult time of buying and selling at the same time. We have mentioned many things that you should keep in mind, such as the state of the market, whether you have paid off the mortgage of your home or not, and other things. Your agent would know this and keep all of these considerations in mind, and many more that you may not have thought of. They will help you make the best choice with what you have, for both selling, as well as buying a house.
As you are buying and selling around the same time, you have double the pressure, and to ease that, you would need the help of a professional who knows their way around the market, and can point you to the right direction, so that you don’t wander off where things will not be profitable for you and waste your time and energy. Better yet, talk to an online agent. It will be more affordable for you and will provide you better options. Online agents use property portal sites like Zoopla and Rightmove, both of which are frequently visited by buyers researching their options. This means that if you are selling your house, your online agent will be uploading the images of your house on these sites which have the traffic of serious buyers, and it increases your chances of getting buyers. Even in the case of buying a house, your online agent will guide you towards the best options that are available, which would have taken you more time had you done it yourself.
Backup Options You Can Consider
You have many options for your contingency plans when you are buying and selling around the same time. To deal with the financial problems that you will face, here are some of the solutions that might help. Look over them and see if it suits your needs.
Option # 1: Bridging Loans
A bridge loan is a type of short-term loan that is used when an individual or entity requires funding until a permanent financing solution is acquired. These loans usually have high interest rates due to their risky nature. These loans can be very useful to buy a house while you are selling one, too. You can simply take the loan to pay for the mortgage for your new house, and then return the loan when you finally sell your house. With a bridging loan, you can deal with the pressure of buying a new house quickly.
Where Can I get a Bridging Loan?
If you are wondering where to look for if you are in need of a bridging loan, then we would recommend that you go to a Financial Conduct Authority (FCA) regulated broker, who will be trustworthy enough to recommend you a loan only if your circumstances are viable to let you do so.
When to Use a Bridging Loan?
The drawback with using this type of loan is that the interest is usually higher than the regular loans, which means that you should be careful before using this type of loan. Incompetent advisors, or those with their own motives would try to urge you towards taking this type of loan, but you should consult a trusty advisor for this, as you need to be completely sure that this will be the best option for you, even with the risks involved. Think and plan your exit strategy as well, about the repayment of the loan.
The people who should use this loan would be those who have to buy a new home while they are selling their current home. That, too, in the case when they are buying in a seller’s market. This would mean that, since they are buying first, they would be sure that the condition of the market would be favourable in terms of selling, so that they can repay their loan easily.
All in all, although bridging loans are a good contingency plan, you should be very careful before applying for one, and never without the advice of a trusty agent.
Option # 2: Contract Contingency
No matter if you are buying or selling your property in the UK, you have the option to add a contingency in your contract.
In the case when you are selling first, you can talk to the buyer interested in your house, and negotiate to add a contingency in the contract, that would line up the dates of the selling of the house to the buying of your new home.
On the other hand, if you are buying your house first, then you can ask the seller to add this contingency of lining up the dates.
When to Use a Contract Contingency?
Contract contingencies come in handy when you really need to line up your closing dates of both the houses closer. You can always try to negotiate with the buyer or the seller to add the contingency. Although it might not always work, since the buyer or the seller themselves would be working on a schedule of their own, you can definitely try.
This might work really well in a buyer’s market when people have a hard time finding a buyer. You can negotiate with the seller to add this contingency, and since they would be desperate to sell, they would be more willing to add this little detail. However, do convince them that your house is going to sell quickly, so they have no need to worry about the contingency too much.
Option # 3: Sale and Rent-Back Scheme
The main problem with this process of selling first and buying later is that you would be homeless for the time till you get a new house and shift there. Of course, you could simply rent a house, but it would be really exhausting to shift all your stuff to the rented apartment and then move out to your new home after you buy it. After all, moving is stressful business.
So what do you do?
You can sell the house at a price lower than it is in the market, and continue to live in it, paying rent to the new owner. This is the sale and rent-back scheme, and with this method, you will skip the need to move, and you can continue looking for houses at your ease.
When to Use a Contract Contingency?
As it is with all the options that we have provided as a backup plan, this option should also be used as a last resort, when this is the only possible way. The problem with this plan is that if you fail to follow the tenancy rules, you will lose that house, so you need to make sure that you have enough money to pay the rent, and that you abide by all the rules so that you don’t get evicted. In addition to this, you also do not get enough money for your house, so you should only consider this option if all other options are worse than this.
People who would prefer this option would be those who fear to lose the house due to mortgage arrears.
Tips For Buying a House in the UK
Here are some handy tips to go over for buying a property in the UK.
- Prepare a thorough budget.
- Look out for loan option. You would need them.
- Boost and maintain your credit score.
- Take amazing pictures of your house. Hire a professional photographer if necessary.
- Check your competition, and make sure that your pricing is right.
Tips For Selling a House in the UK
In order to sell a house in the UK, there are some things that you should keep in mind. Here we are listing them out for your ease.
- Make a budget. There are quite a few expenses that come with selling a house.
- Do not forget to get an Energy Performance Certificate (EPC) before you sell your property.
- Get a “makeover” of your house, and improve the curb appeal.
- Make sure that your house is always available for visitation, even when you are not at home.
- Provide benefits for your buyers to stand out from your competition.
If you are worrying about buying and selling your property in the UK around the same time, and/or are looking to rent a house, you can contact iMoveEstates for advice, and have a look at their extensive packages for each of the three options, as well.