Should I Sell My Home Before Building a New Home?
- Home Buying Tips
- Friday, September 27, 2019
It is a classic chicken/egg type of a question.
Should you sell your current home before – or as soon as – you commit to building a new one? Or do you start building first and sell closer to the completion date?
It is a very good question – and one you are not alone in asking. According to Dennis
Hwang, a Calgary-based realtor with Remax, his clients are split about 50/50 between the two approaches.
“It all comes down to a buyer’s tolerance for risk and the degree of security they need to feel comfortable and at peace in their decision,” he says.
For some, the decision is fuelled by the worry they could be stuck with two properties – and two mortgages.
However, with the right realtor, the right builder and the right sales strategy, you can greatly minimize the risk and reduce the worry.
Below we’ll explain all your options, including the pros and cons of each. We’ll also show the importance of pricing your home to sell and how to stage it to show well with buyers.
Build Time vs. Average Sale Time: What You Need to Know
Before you decide whether to put your house on the market sooner or later, consider these important timelines, which may impact your decision.
- Typically, a new home will take between 6 months to 9 months to build. If you would like to move in sooner, purchasing a
quick possession home is also an ideal solution.
- On average, a Calgary home is on the current market for 60 days (Source: Calgary Real Estate Board). In other words, it is expected to sell within two months.*
- On average, the buyer of your home will want/expect to move in within 30 to 60 days of closing. Negotiating a longer possession date may limit your ability to sell.
* A few factors can impact the selling time, including the type of home, the condition of the home and how reasonably it is priced. Dennis Hwang says that condo apartments and homes valued over $1 million typically take a little longer to sell in today’s market.
So the reality is that if you are building a new home, you actually have a lot of time to sell your existing home. This is a luxury you do not have when purchasing a resale home.
Option 1: Selling Before (or When) Your New Home Build Begins
If you want to ensure you have all your finances in order before making a new home purchase, then this option may suit you best. With the money from the sale, you will also have a clearer idea of your budget and how much to spend on your new home.
While this option may alleviate your concerns over finances, it can cause greater stress in terms of planning temporary living arrangements as you wait to move into your new home, unless you decide to purchase a quick possession home.
By selling well in advance, you may need to move into a rental home or with family/friends in the interim.
Pros: Added assurance, security, and peace of mind. Money in hand from your home sale.
Cons: The need to find short-term accommodation and storage while your new home is being built. The effort of “moving twice.”
Option 2: Selling Closer to Your New Home Possession Date
The other option is to sell your home closer to the possession date. Dennis Hwang says that he will typically advise clients to list 3 to 4 months in advance of their new home possession.
“This takes the average sale time into consideration and also leaves room to negotiate a 30 to 60-day possession with the new owners so you can comfortably transition into the new home. It makes for a less stressful move,” Hwang notes.
Pros: Eliminates the stress and effort of moving twice. Ability to stay in your home and community instead of interim arrangements. No need for additional storage.
Cons: Shorter window to sell your current home. Fear of not selling.
Is Your Home Priced to Sell?
“If it’s priced right for the market, your home will sell quickly,” Hwang advises.“It’s natural that you want to make as much as possible. Yet sellers often think their home is worth more than it is. If you’re priced out of the market, you will have a much harder time selling it. This is obviously a concern if you are in the process of building a new home.”
Hwang says this is compounded due to the current state of the economy and changes in the housing market.
“If you bought your current home at the peak of the market, 3 to 5 years ago, you may be selling for less than you bought the home for. So in your head, you think ‘I’m losing money’.
However, Hwang reminds his clients that it is all relative. You may be selling for less, but you are also buying for less – and sometimes much less. Assuming your new home is larger, Hwang says you’re actually coming out ahead in most cases.
Other Ways You Can Improve Your Ability to Sell
To ease the transition, Trico offers a List For Free program. We will recommend a listing realtor and cover that realtor’s listing fee, saving you thousands of dollars. This also allows you, as the seller, to maintain greater equity in the sale price.
Another program Trico offers is the Showhome Leaseback Program, where you can purchase a Trico showhome and move in after it closes. We will lease the home from you while the showhome is operational – paying you a monthly rental income – and you will also have extra time to sell your current home.
In addition to pricing your home to sell, it should be properly presented to sell. Hwang advises his clients to cut back on the clutter – including moving or minimizing furniture to make rooms look clean and spacious. Personal items, such as family photos, should be packed away. In some instances, a fresh coat of paint or minor fix-ups can make a world of difference.
Embrace the Excitement of a New Home, and a New Stage in Life!
Dennis Hwang says there are misconceptions around selling a home that leads people to be overly cautious when selling a new home to buying a new one.
“I’ve learned that if it is priced right, your home will sell quickly in this market. The fear around not selling a home is exaggerated and can be an unnecessary source of worry. Your realtor and your builder are there to help you make the transition to a new home as easy and as rewarding as possible.”