Should you sell your house before buying a new one?

When most people move up the property ladder, they buy and sell at the same time. The big drawback to this is that you become part of the dreaded property chain – and dependent on a number of other buyers’ transactions all going ahead as planned.

But what if there was another way? A second option is to sell your home before you find a place to buy. Selling before you buy has plenty of advantages. But before you rush to put your house on the market, it’s important to work out whether it’s right for you. This will depend upon your personal circumstances but also the market conditions in your area – so it’s vital you do plenty of research.

To help you weigh up the pros and cons around the question should you sell your house before buying – we’ve pulled together a guide, based on our experience of this issue.

Should I sell before buying?

In a nutshell – yes, if you have somewhere else to live while you find a property to buy or are happy renting and if you are selling in a difficult market while buying in an area where properties are scarce.

Here’s why …

Advantages of selling before you buy

Selling first puts you in an undeniably strong position when you come to buy. With nothing to sell, you are an attractive prospect to vendors – and real estate agents, who will be happy to put your offers forward.
It’s all a lot less stressful – no messy chain and, if you’ve moved into rental accommodation, the space to find somewhere at your own pace.
Having sold, you will have the equity from your sale and know exactly how much you have to spend.
In an unstable market, where prices may fall, you have the security of having made a sale.
As an attractive buyer you may be able to negotiate for a better deal and are less likely to be gazumped. This is because you can set conditions such as having the home come off the market.
Similarly, when you’re selling you can hold out for a good offer because you aren’t under pressure to make a quick sale.

Of course, there are also some disadvantages to selling your home before you buy:

You’ll need to be prepared for the prospect of becoming homeless – and be willing to rent for a time or move in with family.
Renting is an additional expense, you’ll need to go through the whole business of references, deposits and tenancy agreements and many rentals will want you to commit to six months, minimum.
You’ll have to move twice and maybe keep your belonging in storage.
If you’re too picky when looking for your next home, the market may change pricing you out of buying in your preferred location.

Buying a home before you sell yours

Another way to avoid a chain is buying a property before you sell. This is only open to you if you have the capital to buy a second home – or you can secure two mortgage offers. But again, it will buy you the time to move at a more relaxed pace.

Advantages of buying before you sell

It’s much less stressful than joining a chain.
As a cash buyer, you will be in a good position to be taken seriously and negotiate.
You can move in when you like – getting any improvement works finished before you’re living in.
If prices are rising, you can buy now and wait for the equity in your own home to increase.

Disadvantages buying before you sell

Not everyone has the luxury of this option.
If you own two homes, you’ll be liable for the 3% stamp duty surcharge, making the purchase price higher – though you should be able to claim this back if you sell one property within three years.
You may also be liable for capital gains tax when you sell one property, if it has risen in value.

More about the chain

If neither of these options are workable, you will need to resign yourself to joining a chain. If you’re not sure what a chain is, it’s a series of property transactions linked together because each person needs to sell their home before buying another. The chain begins with a first-time buyer or investor and ends when a property is sold because someone has died, moved into a newbuild or decided not to buy for some other reason.

But don’t despair. While term chain makes it seem like a long and precarious process, the average UK chain length is only three transactions.

Chains can break; because a buyer pulls out, a survey shows up an issue or someone’s mortgage application is rejected. You can’t always do anything about these problems, but you can do your best to keep your part of the chain moving smoothly:

Understand the conveyancing process and what is happening when.
Keep in touch with your solicitor and estate agent weekly by phone or email.
Have all your paperwork in place as soon as possible.
Sign and return every document as soon as you receive it.
Do your mortgage research and get your application in as soon as you can.
Choose your estate agent carefully – local high street firms are often better at managing a tricky chain than online only agents.
Don’t go on holiday during the process – and check whether your solicitor or agent has any time off booked.
Have a contingency plan in place, just in case.

A word about deposits and second time buyers

When you buy property, you pay a deposit to the seller – usually 10% of the purchase price – due when you exchange contracts. It’s normal practice for only the first buyer in a chain pay the deposit and for this to be passed up the chain.

If, as a second-time buyer, you are upsizing, 10% of your purchase price is likely to be higher than the deposit paid by the first person in the chain. This is not normally an issue, but some sellers and their solicitors may demand the full 10% from you – so you need to be prepared to come up with the funds at exchange.

Porting your mortgage

If you have a mortgage and decide to move house, you can usually take your it with you to the next property, increasing, or decreasing, the sum borrowed as necessary. This is known as porting your mortgage. If you decide to sell your home before you buy and move into rented accommodation, you may need to pay an early redemption fee to your lender – so it’s a good idea to talk to them at an early stage.

Where to live between selling and buying

As we’ve said, renting while you look for a place to buy can add to your costs and will mean moving twice – but don’t rule it out. While you may find yourself tied into a lengthy contract, it is usually possible to find short-term lets, which may be cheaper – see if you can do a deal with an Airbnb or holiday home owner if you’re renting off-season. Alternatively, ask around in case family of friends can put you up.

If you’d like more advice about buying, selling or both, we’d be happy to help. Contact us today, whether you’re looking for your dream home or thinking of putting your property on the market.

ALLEN RESIDENTIAL SALES ON 01761 412300

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