How to: Selling Your First Home and Then Buying Your Second
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by Richard Morrison
- January 16, 2020
- Buying
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Things to Consider As You Sell Your First Home and Buy A New One
Selling your first home and buying your second can be an exciting but challenging process. It involves a lot of steps and considerations, such as the time it takes to sell your home and the right time to find your next home.
The first step is to sell your house, which requires research and planning to determine its value and the best time to put it on the market. This will allow you to accumulate home equity that can be used towards your new home.
The next step is to find a new home to buy, which can be done simultaneously with the home sale or after selling your house. If you decide to buy your new home without selling your current house first, you may need to take out a second mortgage or find alternative financing options.
However, it’s often recommended to sell before buying to streamline the process of buying a new home and securing a new mortgage. It’s important to take into account the time it will take to sell your current home first and the process of buying your new place before trying to sell. Overall, selling your first home and buying your second requires careful planning and a thoughtful approach to ensure a smooth transition into your new home.
Key Takeaways
- Assess your personal financial position, understand local housing market trends and evaluate options before deciding whether to buy or sell first.
- Coordinate closing & possession dates realistically while preparing necessary paperwork related to the transfer of property.
- Get ready for sale by decluttering, addressing small repairs, painting walls neutral colors and staging rooms appropriately.
- Understand associated costs when buying & selling including real estate commissions, legal fees and sales tax on commission as well as Property Transfer Tax exemption rules in certain provinces like BC/Ontario up until $500 000 threshold.
Keep Reading:
- Buy a New Home While Selling Your Old House
- What You Need To Know Before Making An Offer
- How To Buy A House From A Family Member in Canada
- Selling a House Less Than One Year of Purchase
- Asking Price vs Selling Price: Determining Fair Market Value
- What Typically Comes With a House When You Purchase It?
Things To Consider As A First Time Home Seller: Buy A House Or Sell First?
Before selling their first home, potential sellers should be aware of the many considerations that come with this major life decision.
Should You Buy Or Sell First?
When deciding whether to buy or sell your first home, it is important to consider market conditions and evaluate how the situation could affect the purchase or sale.
For most homeowners, the decision of whether to buy or sell first comes down to assessing their personal financial position, understanding local housing market trends, timing considerations for both transactions, and evaluating which scenario gives them better advantages.
Before making a decision, it’s important to understand each option’s pros and cons. If you decide to sell first then you may be more likely to accept the first reasonable offer on your house in order not risk losing out on something better when buying.
On the other hand, if you choose to buy a new home before selling your current one this can provide some space and time for finding the right property without feeling rushed into taking any offers that aren’t suitable – as well as knowing what you’ll have left over from selling once you know your purchase price upfront.
Finally, another potential option is turning your existing home into an investment property by renting it out; however this should only be done with careful planning due current regulations in Canada nonetheless remains an attractive choice given potential return-on-investment benefits.
It’s essential therefore carefully evaluate current market conditions while also considering personal preferences such as future homeowner needs before choosing which path is best for individual circumstances rather than jumping into rushing either process simply “because everybody else does”.
Coordinating Closing And Possession Dates
When selling your first home and buying a second, it is important to understand the importance of coordinating closing and possession dates. Typically, closing occurs four to six weeks after signing a purchase and sale agreement.
On closing day, the property is transferred from the seller to buyer and their name become registered on the property title as the legal owner – this is known as completion date.
It’s also important to consider when you’ll physically take ownership; commonly referred to as possession or occupancy date – this may vary depending on local customs.
Both buyers and sellers should ensure that all parties involved are aware of these dates so that they can prepare accordingly for either a smooth transition between homes or unexpected events such an inability for one party able be ready in time for either item.
It’s crucial to handle closing and possession responsibly both legally & logistically since these two items have significant financial implications while transitioning into your new home or whether renting out your old place afterward.
Therefore, it’s important pay attention while planning timing around coordination of documents concerning transfer papers of current residence in addition paperwork required by lending institution related upcoming home purchase properly.
Getting Ready To Sell Your Current Home
Assembling a team of professionals is key when selling your current home and buying a second one. A qualified real estate agent will be able to provide expert advice on any matters related to the sale, along with assisting you in filing paperwork and other necessary tasks that need to be taken care of.
It’s also important to consider your financial position before beginning the process. Even if you are confident that you have the funds available for both transactions, taking some time to evaluate everything can ensure that there won’t be any unexpected costs or surprises associated with either purchase or sale.
You should also take steps in order avoid common mistakes made by first-time home sellers such as failing to research local pricing trends, overpricing their homes, and not getting an appraisal.
Here are some tips:
- Declutter and deep clean
- Focus on curb appeal
- Address small repairs
- Paint walls neutral colors
- Stage rooms appropriately
- Optimize lighting for photos
- De-personalize décor
- Offer an Information package on home features and highlights
- Improve budget items such as windows, doors, and lighting fixtures
- Schedule showings conveniently with an online system
- Consider specific window treatments depending on the style
- Include interior painting and top exterior tasks like pressure washing
- Update siding, roofs, doors, decks, and landscaping
- Bring dated areas up to date with a makeover
- Consider replacing appliances with updated products
- Make sure everything is in working order and plan for service if needed
- Repaint furniture and objects to match the environment
- Create an ideal condition that appeals to potential buyers
- Overall, improve the marketing strategy and highlight the value of the home
- Ensure the desired visibility is achieved.
Keep Reading:
- Tips for Selling Your Home – Guide for Vancouver
- Sell Your Home and Rent it Back: A Guide
- Closing Costs of Buying a Home in BC – A Detailed List
- How to Sell Your Home At Auction in Canada
- How To Sell Your Home In A Sellers Market
- Is It Better to Sell Your Home or Rent it Out?
Understanding The Costs Of Buying And Selling
The costs associated with buying and selling a home can be overwhelming for first-time home sellers, especially when purchasing a new home at the same time. As such, it is important to understand these expenses before starting the process of both buying and selling.
The major costs include real estate commissions, legal fees, sales tax on real estate commissions, moving expenses and closing costs (such as obtaining title insurance).
Real estate agents typically charge commission based on a percentage of the sale price – this varies from area to area but it usually falls in between 1-2%. Other charges may include lawyer’s fees for the conveyance work and oversight of documentation.
In addition, there is sometimes a sales tax imposed upon the commission by government agencies which needs to be factored into any budgeting. Knowing all of these charges upfront helps potential buyers save money during their transaction by allowing them to better plan their finances ahead of time.
Deciding On The Size Of Your Move-Up
Deciding on the size of your move-up as a first time home seller is an important consideration when transitioning to a new property. Should you buy and sell simultaneously? Which is more beneficial — upsizing or downsizing? To make the most informed decision, it’s best to assess your needs and long-term goals in order to identify which option will suit you best.
Whether it’s upsizing or downsizing that appears more suitable, there are advantages and disadvantages associated with both. On one hand, selling your current home may result in greater profit if you decide to upsize; however larger homes also come with higher maintenance costs, utilities expenses and taxes so this should be factored into the equation.
Downsizing can offer substantial savings each month due to lower mortgage payments as well fewer household bills – yet smaller properties may not meet all of your space demands in future years.
Choosing wisely can determine how comfortable and financially secure you’ll be in years ahead so people often choose what works for their individual needs rather than submitting solely to market trends.
Identifying Your Homeowner Preferences
When selling your first home, it is important to have a clear understanding of your needs and preferences. Knowing what features are essential helps you to stay focused during the home search process and makes sure that you find the right property for you.
Prioritizing your wishes also allows prospective buyers to assess whether they would be able to meet them, which can help narrow down offers quickly. Additionally, it’s important to keep in mind that sellers usually have less than 48 hours in most cases to consider an offer after its presentation.
Understanding your own needs and preferences before making any commitment can save a lot of time and prevent rushed decisions on such an important matter. Once these items are clarified early on, it’s easier for potential buyers to understand their options when crafting their offers as well as provide realistic ones within certain parameters if needed.
Rules And Financing For Buying A Second Home
Understanding the regulations and financing when buying a second home is a critical factor in the decision-making process, so take time to review all the options available.
Regulations For Buying A Second Home In Canada
If you are interested in buying a second home in Canada, there are several rules and regulations to consider. First of all, the minimum down payment required for a second home is 20% of the purchase price.
This means that you must be able to cover at least this amount with your own cash or other liquid assets—such as investments and retirement accounts—before applying for any type of financing.
Additionally, starting January 1st, 2023 non-Canadians will be prohibited from purchasing residential real estate in Canada for a period of two years. Seeking advice can help ensure that buyers understand their responsibilities when investing in property outside their primary residence.
Financing options available vary depending on factors such as type of housing desired (e.g., condo vs single family home) so it’s important to review your specific requirements before making an offer on a property.
Financing The Purchase Of A Second Home
Purchasing a second home is not something to be taken lightly. If you are looking at financing the purchase of a second home, it’s important to take into account the qualifications and regulations that lenders consider when approving your loan.
Your credit score, current market conditions and debt-to-income ratio are all important factors in determining if you qualify for a mortgage for your new property.
At RBC Royal Bank, they offer different strategies to help sellers navigate their move from one dwelling to another by helping them coordinate their real estate transactions so that both properties can close simultaneously without any gaps between dates of possession or closing.
A common strategy also includes the use of mortgage contingencies which allow buyers who have yet to sell their first house flexibility — as long as they obtain financing within a reasonable time frame, they are able to continue purchasing even before they finish selling their prior home.
Owning multiple homes also comes with tax implications such as capital gains taxes applied once you sell your two properties within Canada so understanding these details is key when making this financial decision.
Assessing The Investment Value Of A Second Home
As a first-time home buyer, it’s important to assess the investment value of a second home before deciding to purchase. What sets aside investment property from just buying another home is that there are several sources of income potential associated with it.
An investor may be able to generate rental income from tenants or residual profits through renovations and upgrades that increase market value in order to resell at a higher price.
It’s essential for an aspiring investor to thoroughly research the local real estate market in order to identify any great investments opportunities; understanding things such as prices per square foot will help create realistic expectations surrounding future profitability.
When considering an area one should consider its school districts, amenities (e.g., hospitals, gyms etc.), desirable features (i.e., water view, golf course), and transportation options – these can all contribute information about potential rental demand by prospective tenants down the line if applicable depending on usage plans for your second home purchase.
Understanding Capital Gains Tax On Property Sale
When selling a second home, it is important to understand the implications of capital gains tax. Capital gains tax is imposed on any gains made from the sale of a property when compared to its purchase price.
This includes real estate investments. Though principal residences are exempt from this tax, investment properties may be subject to some or all of the capital gains depending on how much income was earned and what rate they qualify for.
To properly calculate capital gains tax on any sale in Canada, there must also be consideration given to inflation and other factors that can affect the bottom line amount payable.
Benefits Of Buying A New Home Before Selling
include avoiding rushed home purchases, securing the home you love, controlling your moving timeline, knowing your sale profit, managing only one mortgage and staging your own home for sale.
Avoiding Rushed Home Purchases
First time home sellers should consider the benefits of avoiding rushed home purchases. Taking the time to carefully assess both current and future needs is critical for a successful move-up purchase.
Purchasing a new home while still owning an existing one creates additional pressure that can make it difficult to find and secure the right property in an optimal period of time.
Taking the extra step to fully understand real estate market trends, mortgage preapproval requirements, capital gains taxes on property sale, and other important considerations could prove invaluable when making this transition.
- Save money by carrying only one mortgage when buying before selling your current home.
- Control your own closing date for increased flexibility in coordinating working schedules.
- Stage your own home to have complete control over how others view it.
- Understand costs upfront for easier budgeting.
- Avoid urgency to make more accurate decision-making instead of settling out of necessity or fear.
- Consider Bridging Financing if needed until proceeds from the sale arrive, allowing buyers to act with confidence in complicated timing scenarios involving purchase contingencies.
Securing The Home You Love
Purchasing a new property prior to selling your current one offers numerous advantages. Chief among them is the ability to secure the home that meets all of your needs and preferences.
When you buy first, and don’t have to worry about competing bids or tying up your finances in two places at once, it gives you peace of mind knowing that the home you are making an offer on is yours alone.
Some other key benefits include avoiding rushed home purchases, knowing the profit from sale upfront, managing only one mortgage at a time and staging your own home for sale as desired.
Controlling Your Moving Timeline
When selling your first home and buying a second, controlling the timeline of the move should be a priority. Being able to coordinate closing dates on both ends will help make for an easier transition between properties.
If you don’t have too much time or are limited by external factors such as finding someone willing to accept early possession dates, determining how quickly one needs to buy or sell can be difficult.
To avoid this outcome altogether, consider advantages of buying another house before putting yours up for sale. This gives you more control over your moving timeline and enables you to narrow down suitable housing options without feeling rushed in the process.
Knowing Your Sale Profit
When selling your first home, a key factor to consider is knowledge of your sale profit. This refers to the total amount of money you will receive upon sale after subtracting costs and fees associated with the process.
Calculating this sale profit doesn’t just include taking into account the original purchase price versus the selling price; it also requires deducting any remaining balance for mortgages or holding costs along with any closing expenses such as real estate agent commission, legal fees, taxes and more.
Also included should be things like inspection or sewerage connection fee if applicable. By gauging how much money you’ll pocket from a house sale in advance can allow you to make informed decisions about what kind of budget range and size-pace is desired when moving on to buying your second property.
Managing Only One Mortgage
When purchasing a new home before selling the old one, you are able to manage only one mortgage instead of having to take on two. With just a single loan, this can allow you to maintain financial security without incurring further debt and risk in carrying the burden of two mortgages.
Managing only one mortgage also eliminates unnecessary hassle that comes with trying to coordinate payments across multiple loans. Having control over your finances allows for more flexible availability when it comes time to upgrade or move into a new property experience as well.
Additionally, managing only one mortgage will leave room for better future investments – whether by using these assets towards buying real estate in other locations or dedicating them for other endeavors like retirement savings and emergency funds.
Controlling your moving timeline is made possible too because there’s no need wait around until your old home sells; buyers are free purchase their dream homes immediately and enjoy the ultimate reward of staging their own homes whenever they want since it doesn’t require necessarily being tethered to another location while waiting out potential offers from prospective purchasers.
Staging Your Own Home For Sale
Staging your own home for sale is essential when it comes to standing out in today’s competitive real estate market. Home staging offers substantial benefits that can help sellers maximize the value of their property and attract more potential buyers so they can achieve a higher selling price.
According to Real Estate Staging Association, staged homes spend 73% less time on the market than un-staged ones. Staging can be done by homeowners themselves and doesn’t need a large investment – there are inexpensive ways to make any house look attractive – such as simple rearranging or updating small details, like painting walls and window sills in bright colors.
More elaborate projects include decluttering unnecessary items, tidying up closets, making repairs before listing the property etc Each one of these steps helps give your home an appealing look and stand out from other listings on the market .
FAQs
1. Is there any difference in financing a second home than a first one?
Yes, typically Canadian lenders offer more relaxed lending policies for those who are getting into their second homeowner journey due to their established credit history and financial capabilities.
The lender may also require lower interest rates if certain conditions are met regarding employment stability or income level along with an appraisal report from reputable sources like CMHC (Canada Mortgage and Housing Corporation).
If possible try to get mortgage prequalification done by multiple mortgage brokers prior taking any further steps towards buying another house further simplifying your task significantly.
2. What should I consider when trying to assess the investment value of a prospective second home?
Assessing a property’s investment potential requires careful consideration of various factors such as location, current market appetite, long term trends regarding housing prices in the area and overall return expectations based upon associated risks taken assuming timely maintenance is performed consistently over extended period which eventually leads towards cash flow benefits under rental agreements with tenants etc .
3. Are there other costs involved with moving to another property?
Outside of mortgage related expenses, homeowners looking to move often must factor in relocation costs if distances stored are significant enough where hiring services becomes necessary due to security concerns or lack of access equipment like lifts/ trucks; time constraints etc.- this variability heavily depends upon size of items being moved thus creating cause many options such as full-service movers who cover all aspects from packing-to loading plus transit too DIY methods involving renting Uhauls & other vehicles so self relocation can occur over weekdays/holidays instead if preferred.
4. What can I do if my current real estate sale falls through unexpectedly?
If a real estate deal suddenly falls through unexpectedly then take actions quickly such as renegotiate terms with buyer like refinancing loan details within contract document timeframes applicable so offer stays valid while still satisfying all legal obligations set forth in agreements… but since these objects varied wildly according provider consulted best results involve consulting professional advisor on bespoke strategies using their specialized knowledge leveraging degrees/experience lead smoother flow resolution issues arising unexpected sale hits bumps along road ultimately allows transition process continue.
Conclusion
Selling your first home and buying your second can be a daunting task, but it’s not impossible. The process can be overwhelming, especially if you have to sell your old home and buy a new one at the same time.
However, there are several steps you can take to make the process smoother. One option is to sell your old home before buying your new one, which will give you an extended period of time to search for your next house.
Another option is to buy your next home while selling your own home, which allows you to make a payment on your next home before your current home sells. It’s important to weigh the options and decide what works best for your situation. Some prefer buying before selling, while others believe it’s better to sell your home first and use the proceeds to pay for your new house.
Ultimately, it all depends on your financial situation and how quickly you want to sell your house. With careful planning and a little bit of patience, your old home will sell, and you’ll be on your way to buying your new dream home.
Sources:
https://www.investopedia.com/articles/mortgages-real-estate/08/home-seller-mistakes-selling-house.asp
https://www.rbcroyalbank.com/mortgages/selling-buying-home.html
Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.
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