Home sellers are often confronted by an uncomfortable question. What if they sell quickly and have nowhere to live?
The traditional solution goes like this. Find another home you love. Buy it, subject to sale of your existing property or by obtaining bridging finance, and then sell the current property.
This common “solution” presents a danger that more than any other leads home sellers to financial loss.
Agents love it; they obtain a truly motivated seller. Banks love it; they gain or keep a client and get double the interest until the property sells.
However, properties don’t always sell quickly, or at the expected market price. Financial loss when selling can be hard and fast, or so subtle that the seller doesn’t even realise it’s happened.
The most common scenario ends up looking like this: Concerned about being homeless, people begin searching for properties to buy, often finding the perfect home. the dream of the new home plus a fear of missing out prompts them to pay a premium when purchasing. They then ask the purchasing agent to price their existing home. The improbable lie rolls out and the sellers do their figures and decided it’s a perfectly affordable move. They may even finance it immediately using bridging finance.
Their property is listed at an inflated price but doesn’t sell. As the clock ticks by, financial and emotional pressure on the seller increases. This helps the agent “educate” the seller down from the improbable lie to a selling price far below the original estimate. The homeowner ends up selling their original home for less than expected and paying too much for their new home, losing on both sides of the transaction.
Following four simple steps can easily avoid this financial danger.
1. Find a buyer for your existing property. Agree to price and terms with the buyer and ask them to hold. Most genuine buyers will agree to a short wait, especially if they love your property. You now have a firm budget with which to work, and a buyer in place, providing a good solid negotiating position for buying. More importantly, you are safe from the danger of over committing based on false information.
2. You intensify the search for new property. People often find their perfect home within days of starting a serious search.
3. The changeover cost is considered. Can your new home be purchased within the budget allowed for by the sale of the previous home? Finances are assessed and organized at this point.
4. Finally, the new property is purchased subject to the simultaneous settlement of the old home.
Don’t risk your financial security. This will only benefit others. Use a safe and proven strategy when selling.
This article is an excerpt from “Real Estate's Greatest Dangers – How to Avoid Them Through Smart Decisions” written by Andrew Trim – Managing Director of the Johnson Real Estate group.
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