Every day, it seems that the real estate market gets more hectic. The demand for housing keeps growing, but the supply is lagging severely. This situation may be most pronounced in Toronto, but it’s happening all over Ontario. As GTA residents relocate in search of a more affordable lifestyle, the real estate market in the surrounding cities also becomes more competitive.
Peterborough is one place that has caught the attention of many people in Toronto. With its lively entertainment scene, thriving career market, and abundance of greenery, Peterborough is quickly becoming one of the most sought-after destinations in the province. What does this mean for you when you’re planning your next move? Whether you’re downsizing to a smaller house or looking to upsize your living space, you may have your work cut out for you as you seek that ideal home. In this post, we’ll talk about whether your best strategy is to sell or buy first in a competitive market.
Why Would Anyone Decide to Buy First?
Buying a home without selling your existing one may seem like a good idea when the housing market is tight and you face steep competition from other buyers. However, it requires access to significant financial resources, especially if you’re currently paying off an existing mortgage. Think of the upfront costs you need to purchase a property.
- First, you need a down payment that could run anywhere from 5% to 20% of the final purchase price.
- Then, you need to consider your closing costs, which add another 3% to 5%. You can include some of these in your mortgage, but others, like the land transfer tax, must be paid upfront.
- Finally, you will need to finance the purchase of your new home, which may require taking out a second mortgage. The longer it takes for your existing home to sell, the longer you will have to cover both mortgages. In the worst-case scenario, your existing home may not sell at all. If that happens, you could face difficult decisions ahead.
Imagine buying a house for $500,000. Your deposit would be a minimum of $25,000. Currently, the land transfer tax would be $6,475. Add these together, and you’d need $31,475 to secure the home, not including lawyer’s fees, insurance, or property taxes.
Whether buying or selling, it helps to understand the local market in Peterborough. Here is some related reading that will bring you up to speed:
- A Walk Through the Neighbourhoods of Peterborough
- A Guide to the Current Peterborough Housing Market
- How to Find a Real Estate Agent in Peterborough You Can Trust
Where Does the Money Come From?
A few lucky folks may have access to these funds from their investments or in their bank accounts. If that is the case, buying first can provide a sense of relief and security that you already have your new home secured after your transaction closes. You won’t have to rush and scramble to find a place. But for most of us, we’d need to tap into the equity we’ve built with our existing home to cover the purchase.
Depending on how long you have owned your property, you can take out a home equity loan for your down payment. However, you must also use your home as collateral. If you have an unexpected job loss or are unable to make your payments, the bank could repossess your house. For many potential buyers, it simply isn’t worth the risk unless you can comfortably afford to hold two homes.
The Advantages and Disadvantages of Selling First
Selling your existing house before buying your next one has long been the traditional path. In the past, very few people would even think about committing to a new purchase before the sold sign was up. The new trend of buying before selling was brought on by increased competition for fewer available listings.
This new reality of high demand and limited supply can certainly make things more challenging when planning a move. Once your transaction closes, you may find yourself scrambling to find the right house in your price range while often going up against multiple bids. However, there are ways to mitigate these challenges, and the benefits of selling first usually outweigh any difficulties you may face. For example:
- Selling first is less risky. You don’t have to worry about how long it will take or whether your house will sell at all. The deal is done, and you’re ready and empowered for your next steps.
- You will have a clear budget for your next purchase. Not only is the uncertainty of whether your house will sell erased, but you know exactly how much you will have earned from the sale. This financial security can provide a much-needed boost of confidence when searching for your new home.
- You have a competitive advantage against other potential buyers. The supply might be tight, and you may come up against other hopefuls who have their eyes on the same house. However, you are in a better financial position than many of your competitors. They may have to place conditions of financing or the sale of the existing home, whereas you can come to the table with a firm offer.
Looking for more reasons to live in Peterborough? Look no further than the posts below:
- 5 Things You’ll Never Miss When Relocating to Peterborough from the GTA
- Why Peterborough is Perfect for Families
- Is Peterborough Dog Friendly?
Navigating the Challenges of a Competitive Market
Now that you know the advantages of selling your existing home first, let’s look at some of the ways you can overcome these obstacles the current market throws into your path.
- Do everything you can to maximize your sale. Earning the highest amount possible sets you up for a successful purchase later. Thorough cleaning, minor repairs, a competitive pricing strategy, and an aggressive marketing campaign can add significantly to your bottom line.
- Work with a concierge real estate team for the best results. Some homeowners may try to go it alone to save on commissions. However, a successful transaction is not about how much you save but how much you earn. A full-service real estate team that is active in the local market will almost always ensure you end up with more in your account when all is said and done.
- Be prepared to act quickly. Don’t wait until your house sells to begin preparing for your next purchase. You can speed up the process and give yourself the best chance of success by researching available listings in your choice neighbourhoods ahead of time. If you are financing your purchase, getting a pre-approval in advance can save you valuable time in competitive situations when every second counts!
Do you have questions about buying or selling in Peterborough or the Kawarthas? We have served these areas since 2018 and are happy to show you around! Reach out to team@jeffandkatie.ca or call 705-243-9797 to start the conversation today.
