Should you sell before you buy a house?

Many of us are more comfortable selling first, so we know we’re definitely in the position to make an offer on a new property. That said, if you’re on a regular income and have decent equity in your existing home, you might be able to borrow to buy a new property before you’ve sold your old one.

These things might influence your decision too.

Research, research, research. It could literally pay you to school up on the latest trends in your city, town and suburb. 

This means there are plenty of houses for sale, but fewer buyers. 

Generally, if you’re selling, that means it could take you more time to sell, or you could get less money than you wanted – or both. 

In a buyer’s market, some property hunters prefer to sell their existing home first in order to be sure of their cash flow before financing their next house. 

A seller’s market flips everything on its head, meaning fewer homes for sale, but loads of keen buyers. This ramps up competition, which tends to drive up prices too. 

In this market, some property hunters choose to buy first, as they feel confident about selling their existing home for the price they want. 

Things get a little more complicated if you don’t buy and sell in the same market – especially if you sell in a buyer’s market (lower prices), then try to buy in a seller’s market (higher prices).

Your financial position and appetite for risk really are the most crucial factors. 

It’s really important to double-check your financial situation regardless of whether you buy or sell first. For example, could you cover the period between when you purchase your new home, and your existing home sells and settles? 

It’s always wise to have an option up your sleeve in case it takes longer to buy or sell than you first anticipated. 

For example, if the settlement date on the home you’ve sold is earlier than on the one you’ve bought, what’s your interim solution? 

Will you rent, stay with friends or family? This will mean an extra move, sorting storage – and the associated costs. 

Here’s another scenario to ponder. You buy first, but it takes six months longer than you initially thought to sell your existing property. Now you’ve got two mortgages to cover. How will you stay afloat?

Bridging finance (a short-term loan) could be an option. Or, you could secure a short-term tenant for your existing home.

However, bridging finance usually has special interest rates that apply and different fees, and if you don’t sell your home quickly, you could be paying two loans for a while.

For any scenario it's important that you consider any potential tax implications, for example the bright-line property rule. We recommend you seek independent advice from your accountant, tax advisor or other advisor to help you determine any tax implications.

Don’t try to make these decisions on your own though. That’s what the experts are for. 

Start with a chat with a local real estate agent (or three) about the current market. Then enlist an ANZ Home Loan Coach, who can help you understand your equity position and your home’s estimated value. 

Remember, knowledge is power when it comes to deciding whether to buy or sell first.