Buying before selling

[Agenda]

I'm really not sure what to do here so hoping for some feedback.

We currently have a $280K mortgage on a $500K unit on the northern beaches in Sydney - its a great unit, fully reno'd with a view of Long Reef Headland, faces east and is quite large at 100sq.

After owning this property for 8 years we are looking to upgrade, thing is, on the Northern Beaches in our new price range there is very limited stock. We are looking for either a unit or if possible a small house in the $650K - $800K range, we probably see something we like come up once every 6 weeks or so.

So, with a good unit knowing we could sell within a reasonable timeframe, is it risky buying our new property first and then flogging the unit? My concern is that if we do sell the unit we could be left high and dry without a suitable upgrade. I am sure anyone who knows the NB's market will know what I mean.

 

[Rolf Latham]

Hi Agenda

A core risk management tool for you here is to see if you can settle the new purchase while still holding ur own place.

The equity position looks doable, but we know nothing of your income

Bridging scenario to be avoided because if various risk management issues .

Have a chat with a good broker and see if its doable.


ta
rolf

 

[Propertunity]

Agenda, a $500K unit on the NB should sell within a reasonably quick time. Houses there under $800K will sell even quicker - so I understand your dilema. All the same I would advise you not to buy before you've sold. Markets can change in a matter of weeks and you don't want to put yourself in a position of taking a fire-sale price or taking out bridging finance.

One way would be to sell your unit now with a delayed settlement or a 3 month rent-back period as a condition of sale. This gives you breathing space to buy the bargain house when it pops up.

Alternatively, try to keep the unit, refinance a deposit for the new PPOR out of the equity you have in there and have your cake and eat it too. (Of course I am a fan of buy and never sell - so I declare my bias here). Your finances may not allow for it - but run the numbers and see.

All the best with the move.

*edit* I see rolf is on the same page as I'm typing

 

[Richa]

we just did this and its a risky way to do things. If buying first make sure you have an extra long settlement period (we had 14 weeks and needed all of it). It would help to know the vendors intentions as they may be willing to rent it back off you on a short term basis if a long settlement isnt available. As said here, the market can turn very quickly and you could be in a fire sale if you dont have the ability to finance both properties.

 

[NickZed]

Agenda - my wife and I are currently living in an apartment in Manly are going through the same dilemma....how to go about upgrading our PPOR????

We are looking to buy in Freshy / North Manly and then sell our apartment in Manly.

Risk mitigation - I have finance pre-approved for the new purchase and will be able to hold both (unrented) whilst the apartment is sold, however, not over the longer term.

Other factors to think about:-

• We have been struggling to find a house in the area that we are targeting that fits our requirements.
• We have a young daughter (5 months).
• It seems as though sourcing the new property could take a while.
• Given the above, I personally have come to the conclusion that I would prefer the financial stress of holding both properties over the emotional stress of selling our unit and having to go and rent a place whilst we try and find the new place.....

My risk mitigation attempts:-
• I have finance pre-approved for the new place – using the equity in our current PPOR.
• Sales value of our apartment – I’ve done a fair bit of research and had three agent appraisals of the value of our apartment. As such, I've got a reasonable handle on what I think the apartment will sell for.

Opinions:-

• I’d be interested in anyone’s thoughts on this…
• Any opinions on whether using a buyers agent in this geographical area (Freshy / North Manly) would speed up the purchase process?

 

[Agenda]

Thank you so much!

I would love to be able to hold our currently property to rent out and buy a new one - I think we are virtually neutral on this property if that were the case. Thing is I am nervous about being that exposed - I calculated we would need to go into debt $910K to do that, even with renting the current place at $490pw we would be up in the $900-$1100pw (we earn $2200pw gross). I will look into it though Propertunity.

Not too worried about finance and we definately get pre-approval.

Nick - How hard is it! We have held off for two odd years now because we are just too nervous to proceed. Currently in DY looking at going around Cromer, Beacon Hill..

Thanks again, helps so much to hear others thoughts.

 

[Propertunity]

I’d be interested in anyone’s thoughts on this…
• Any opinions on whether using a buyers agent in this geographical area (Freshy / North Manly) would speed up the purchase process?

Well I'm 'anyone' but I rather think that any opinions I might have on this issue, could be seen as having some bias.

It really depends on if you are looking full time (as a BA might do) or a lot of the time yourself, and how much effort you are devoting to the search. How are you getting on with agents calling you back etc.?

 

[Aaron_C]

Agenda I would suggest you sell first, get that contract of sale locked in, THEN go and purchase a new unit. Not worth to risk to buy before you've sold if you are not comfortable with all the extra debt.

 

[NickZed]

agenda - I'd tend to agree with Aaron... if you aren't comfortable with the debt then sell your place before buying.

Alan - I'll give you a call about the BA stuff.... thanks for your input.

Nick

 

[boomtown]

I would never buy first if I had to sell. Never make yourself into a forced vendor.

Which is different if the purchase is conditional on sale but you may not be able to get as good a price as with a less conditional offer.

 

[pennyk]

One of the risks of just going ahead with pre-approved finance is that the valuation on the new property may come up significantly lower than expected. In our case, the valuation was $150K lower than we expected. That meant we had to find a new lender to be able to complete the sale. We were fortunate that our home sold very quickly, but its not something I would generally recommend. I only did it because we were buying privately from family members, so had a lot of flexibility.

 

[Tillie]

The topic is really timely for me as well. As mentioned in the other thread I found my dream home today. We were planning to just go and get a feel about the area and what can you get for your money and then of course Kaboom! there was a fantastic house. What makes the situation even more annoying is that I can sense that I would have chance to get the house with a fantastic price. It has gone stale, being on the market since November and the asking price has already been dropped by $250k but according to REA the vendor is open for all offers.

But we have not sold and actually even put our PPOR to the market yet. And because of the uniqueness of our property it is difficult to estimate what can we get for it, especially on the current unpredictable market. Not sure what to do? Has anyone here ever made an offer subject to their existing property to be sold with xxx price? Is this type of clause even legal or possible?