BEFORE you list your current home for sale work out your budgets – you will need to get a realistic estimate of the return that you can get from your existing home. Then consider what happens if you don’t achieve this figure (i.e. budget lower). Calculate the costs associated with the sale (agent fees, legals, etc), as well as the costs associated with buying the new home (stamp duty, etc. - see earlier summary). WHEN YOU HAVE DONE THE SUMS make sure that the decision to sell and buy is the right one (and one that you can afford).

Let’s look at the pros and cons of each strategy: -

Selling before you buy: -

The biggest benefit with this approach is that you know exactly what price you will get for your existing home. It helps you figure out how much you can afford to spend on your new property. This is obvious, but very important – you don’t have to guess what you may achieve and you’re not vulnerable to the ups and downs of the market.

You have time to wait for an offer that you consider is fair – You’re not forced into a quick sale because you’ve committed yourself to purchase another property on a set date.

You know when your home is ready to settle – so you don’t have to guess what your timeline will be.

You are ‘cashed up’ with a known settlement date, and will therefore present well to a prospective seller – you know what date you want to settle on and you know what finance is available to you.

As well as getting an offer that is less than you hoped for, you may get a better one and can therefore look for a home in a higher price-range!

Selling and buying can be stressful at the best of times – By selling first you’ll be able to avoid unnecessary risk-taking.

One of the downsides of this strategy is that you may fall in love with a property, but not be in a position to purchase it – You may lose the property of your dreams….. This is true and you may be forced into renting for a while, until you find a replacement. It’s true that this is a risk – but there are good practices that you can follow to help manage this risk:

Prepare yourself to buy whilst your home is on the market. You research the homes for sale, you confirm the prices of recently sold properties, you go visit properties and draw up a short list of the type of home that suits you – in short you do all of the things that we talk about in this guide. You just stop short of making the commitment to purchase (until your home is sold).

Look for a long settlement on your home – one that allows you plenty of time to buy your next home before you need to vacate your existing one. A 6-month settlement is quite common.

Buying before you sell: -

The biggest benefit with this approach is that you get the home you want, and, as with selling, you can often build in terms that will allow you to delay the settlement date to some time in the future (again, maybe 6-months), which gives you a good chance of selling. This strategy is however quite risky. Consider the following: -

Without having sold your existing home, you may not have the (10%) deposit which is due on exchange of contracts. This may mean that you need to organise interim finance to cover the deposit (usually a deposit bond or a bridging loan).

You’ve over-estimated the true value of your home, and now have a shortfall in available funds. You may be forced to borrow more money, or worse still, pull out of the sale and default on the deposit (usually 10% of the purchase price).

It may take a lot longer to sell your home than you had planned. You may need to carry two loans for a while (if you can organise and afford the finance).

When the settlement date starts to approach, you may feel intense pressure to sell – You no longer have the option to wait for the best price. This can lead to you losing thousands.

Your stress levels rise, the task of organising the move, re-schooling, etc. becomes more complex.

The key here is to give yourself time to make the big decisions. You can get into serious trouble if you take risks with your home. If you do decide to take the risk, then consider how you will handle the ‘rainy day’ scenarios. Make sure that you have a plan, and agree to accept the consequences if things don’t turn out as you hoped.