When To Sell
The question I most often get asked is do I sell first then buy another property or do I buy first and then sell. And the answer is different for every person I speak with. But you can work out what is best by thinking about a few options.
The single biggest question for most is a financial one. Do you know what you can spend on your new property before you actually sell your old one? This comes down to getting someone you really trust to give you a good read on the way the market is shaping up. For some who are downsizing this is irrelevant as they know they will earn substantially more for the property they are selling than the one they are purchasing. And if they have money in the bank, or a largely unencumbered property they are selling, even if it takes a little time to sell they can afford to hold both properties for a short amount of time. This is sometimes called bridging finance and anyone who is buying first and then selling needs to make sure they can afford to do so.
But many people are not sure how much they can spend on their new house until they have sold their previous one. And anyone listening to an estate agent who is desperate for a listing needs to understand that there are many agents who may over estimate what they will achieve for your current property. If you cannot get the bank to allow “bridging finance” then you may need to sell your property first.
When selling first you will need to think about some options. How much deposit will I ask for and what settlement terms will I demand. Firstly, 10% deposit is the standard requirement. This means that when a prospective purchaser signs a contract with you, they will pay 10% of the purchase price immediately. This money is paid into a trust account and can be released only once the purchasers’ solicitor has had time to make sure you, the vendor, have a legal right to sell the property. You can request a release of deposit (known as a section 27 early release) by offering a completed early release form at time of sale. Usually takes around 28 days from then to get the deposit released so you can use it to purchase a new property. Be aware, the selling agent will almost certainly take his fees and advertising costs from this money before handing it on to you.
Settlement terms: This is the time between purchase and the time when the balance of the monies are paid and the property is turned over to the purchaser. If you are looking to try and buy a property before your current home settles then a longer settlement may be good. Average settlement times are 60 days accounting for probably 60% of all transactions with 30 or 90 days accounting for another 30% and 10% of sales would be outside of these periods. You can request anything you wish but be aware the purchaser may not be happy with exactly what you want, and you may need to compromise. A long settlement may give you time to find and purchase a new property and settle at the same time as the one you are selling. A good agent can assist you with this.
Furthermore, if you are selling an investment property that has a tenant and you are selling to an owner occupier who would like the property to live in (vacant possession) then you must remember to give the correct notice to your tenant. With new rules for postage times and a minimum of 60 days’ notice to a tenant on month to month, settlement of an investment property offering vacant possession should not be less than 70 days. Again, a good agent will guide you here.