Should I sell my home before or after I find a new one?
Category Advice
South Africa's property market is currently subdued, with the average time on market (the length of time a listing takes to sell) hovering anywhere from several weeks to several months depending on property type and area, this can be concerning for existing property owners looking to move to their next home.
Most homeowners need to sell their existing property in order to finance their next purchase. In an ideal world, both those transactions would take place concurrently, enabling the homeowner to move smoothly from one property to the next. In reality, this timing can be tricky since market conditions typically favour either finding a property or finding a buyer - seldom both.
Sellers' markets
In seller's market, it's usually relatively quick and easy to find a buyer, but it can take a bit longer to make a successful offer on a new home. As a result, we usually recommend starting with the purchase in these circumstances. Once you have a signed purchase agreement on the table, you can then start the process of selling your own home. Approaching a property transaction in this order will require certain clauses to be included in the purchase agreement.
It's standard practice to make the purchase subject to the successful sale of the buyer's existing property within a specific timeframe. A minimum sale price may also be specified, along with finance approvals, if required. It's also important to detail occupational rent and occupation dates, keeping in mind the possibility that the two property transfers may not exactly coincide.
Buyers' markets
In a buyers' market like the present, conditions are reversed, making it faster and easier (on average) for people to buy a new home than to sell their old one. In this case, it may be advisable to list your existing property at the same time as - or even before - starting your own property search.
It can be stressful to contemplate selling your existing home before you have a new one lined up. It's possible to make a successful offer to purchase, within a specific timeframe, a suspensive clause in your sales agreement. However, this can be a deterrent to buyers and end up backfiring in the long run.
It is generally wiser for homeowners to have a plan for temporary accommodations, if necessary, in the event that finding their new dream home takes a little longer than expected.
The benefit of selling first is that you'll have any equity from your sale available immediately to use for your own purchase. That means you may not need to save up for a deposit, and you'll be in a strong negotiating position with sellers as well as lenders if you require additional finance.
Other options
It may not be necessary to sell your existing home at all, turning your existing property into a rental investment can be a very smart choice if you don't need the immediate cash in hand.
Not everyone has the means to make a purchase without selling their existing home, but those who do, have the option of using rental income to finance the bond repayments on their old property until such time as it's paid off and starts generating income.
This is a particularly compelling option when rental yields are high and property prices low.
Going this route enables owners to ride out less favourable sales conditions while creating an income-generating asset that could become the foundation of a profitable property portfolio. Of course, it does rely on your property's ability to achieve a rental yield that equals or exceeds its operating costs. As such, it's always advisable to run the numbers with an experienced rental agent before making any decisions."
Renting Tips:
When deciding what rent to charge, a landlord can either conduct some research themselves or allow a rental agent to tap into their resources for a more accurate view of the following:
Competitive market analysis:
Review the rental rates for properties that compare with yours in terms of size, location, and amenities. This will help you to establish a baseline on which to determine a competitive rate for your property.
Take vacancy rates into consideration:
If there is a large number of properties to let in the area, you may need to carefully consider adjusting your rental price to attract consistent and reliable tenants.
Consider local economic factors:
Take into consideration what is happening in the local economy before setting the rental price. When things like interest rates, inflation, and unemployment levels are high, then rental prices will need to reflect that reality.
Internal and external drawcards:
The unique features that set your home apart from other similar rental homes in the area can help you charge a higher rate. Nearby employment opportunities, infrastructure, and access to amenities (such as schools and hospitals), and crime levels can all influence the property's appeal to prospective tenants and can push up rental prices in the area.
Extract from Property24
Author: Extract from Property 24
