Sunday, December 30, 2012

Buy, Sell? Sell, Buy?

Hey Dan,
My husband and I have been discussing moving, and we have a few questions -
     1. Is it better to look for a house and list our house at the same time?
     2. Or is it better to sell our house first and then look... and hopefully we find something.
We're having the bank do a pre-approval for us which will be good for 120 days, just in case we do find something we love love love in the new year. And I did contact my mortgage lady who said basically what I already knew - that selling first can possibly create a rush situation, and selling and buying at the same time can sometimes create a less desirable offer to the other seller when your condition is based upon the sale of your current home.
She suggested I talk to you as well to see what you recommend. Soooo... Any insight you have would be great!

Thank you so much for your note and inquiry, I look forward to assisting your family in putting together a strategy in finding a new home and selling your current home. To start, let me say that there really is no solid answer to whether you should sell first or buy first.

Let's start by going over the listing process.

Getting a home ready to list and view is a bit of a hectic matter. The days of sticking a sign in the ground and hoping for the best are long gone. Today there are many aspects to the listing that are of prime importance in getting a potential buyer through the door. There are essentially three things that affect you in having a successful and less stressful selling experience.

First and foremost is pricing your home effectively and aggressively. A detailed analysis of sales of similar homes in your community and area is of prime importance to understand better what is going on in your micro-market. Within Canada, Alberta, Calgary and specific communities and jurisdictions we can see quite a variety of activity. We can see that the Canadian market is doing well, or not doing so well, and that trend may or may not be the same in Alberta. On the same token, what is happening generally in Alberta may not be the norm in your own town or city. And even more specific, what is happening within the city may be very different from one community to the next. We have seen a huge expansion in communities close to the city core, both in re-development and pricing. More suburban areas may have not fared so well over the past few months. We need to take the "micro-market" very seriously in determining how quickly homes are selling, and whether prices are trending upward or downward. And most importantly, what trends to expect in the short term.

The second aspect to take into account is how the house and property presents itself to the potential buyer. Without a doubt, Calgary has seen excellent sales over the past year. Something we need to take into account, though, is how the buyer is looking at their investment. In the past seven years or so, we have seen great volatility in the market. Buyers often looked at potential growth of their real estate investment in the short and mid-term. Will the market show significant growth over the next few months and years so that I make a decent profit on my investment? I do believe we are seeing a shift in paradigm and buyers are starting to look at their investment once again in the long term. Can I see myself living in this home for many years, or over a decade? This paradigm shift really is moving back to the way we looked at our real estate purchase prior to our unsustainable growth in 2006 and early 2007, but that's a topic for another day!

Having said that, it would also be prudent to point out how important it is to present a property in the best light possible. Staging a property is of prime importance to show off all of the attributes of a specific home, and to be sure a potential buyer is not turned off because of something that has been overlooked. Even though there has been significant growth in the market over the past year, there are also many, many homes that have been on the market for a significant amount of time, some for many months, and even years. In a volatile market with the potential of a downturn, it is very important to sell your home quickly to maximize your equity and profit.

The third aspect to selling your home quickly and for a maximum profit is to be sure it looks good - no GREAT - online and through the marketing of the property. It irks me to no end when I see questionable photography and inaccurate information in a listing. Without a doubt, the vast majority of potential buyers are going to look at your home online prior to making a decision to visit your home. We are in a very busy and hectic world, a potential buyer will most likely narrow down their search on their computer, losing a potential buyer because of a lackluster presentation is a major consideration today.

Having Realtors make appointments at all times of the day, having the house in top shape for every showing and having to move out the troops for those showings is a bit of a pain! Our strategy and goal is always to sell the listing in as short a period of time as possible. In my opinion, that achieves both the best price for the home and the least amount of hassle and stress for you. Having said that, the question remains should one sell first or buy first…

The first question is whether or not you can be approved for financing to carry two properties simultaneously, even if it is for a short while. The probability of holding two properties is daunting to most, and that scenario got a lot of homeowners in trouble in the latter part of 2007 and well into 2008 and 2009. Although we have seen that many homes have sold quickly in Southern Alberta this past year, there is always a possibility that a sale will take longer than anticipated.

I have recently been in contact with a homeowner that has purchased a new home and takes possession in the next month or so. They have explained to me what their "bottom line" is in selling their existing home in making both transactions work smoothly for them. The issue with having a “bottom line” is that we are trying to predict what a buyer in the current market is willing to pay for a specific property at this point in time. If that price is less than the sellers “bottom line” there is only one outcome… they will not sell their home... so they may be in for a huge reality check with two homes and two mortgages. This is a scenario that I try to avoid for any of my own clients, it can certainly get messy.

Alternatively, one can make an offer on a property with a condition to sell their home within a specific period of time. The issue with this scenario at this particular point in time is that there are quite a few buyers looking for premium properties and the inventory is quite low. So the question is, would a Seller be willing to entertain an offer with a condition to sell another home when they could possibly secure a deal in a short period of time with no such condition? The other consideration is this... even if you are able to secure a potential sale, in the current market there is a very good chance that another buyer will come along and make a second offer on the property, forcing you to make a decision on whether to move forward with the purchase of the new home with no condition to sell your home, or walk away from the purchase. Although it may not sound like a problematic issue, the fact is that you will have made a decision to purchase the new home, and if you are unwilling or unable to hold two properties at the same time, it is a heartbreaking experience to "lose your new home". In my experience, after a deal falls apart for this reason, the Buyer is now always comparing their new search to the home they lost.

The third choice is to sell your current home and search for a new home once an offer is secured. The advantage to this scenario is that you are totally aware of your budget and what your home sells for. The disadvantage is the fact there may not be a property that you like, or are able to secure, for some time. That would mean you may have to rent or stay with friends or relatives until a property comes up that works for you. Alternatively, you may settle for a home that does not meet all of your criteria. This is what happened in 2006 when there was such high demand for homes and scarce supply. Many Buyers may end up settling for something less than they are comfortable with in anticipation of purchasing a better home down the road when they anticipate the market will settle down. If the market fluctuates so that the value of the home they “settled” on decreases, they may not be in a position to relocate for quite some time and may very well be unhappy with their home for years to come.

The current market in Calgary does seem to be leaning towards a “Seller’s” market, what we need to determine is whether that is a short term phenomenon or something we can anticipate throughout the next year? Many in the industry are anticipating an ease in the market in 2013, and I would lean toward that prediction. There are many, many variables that I feel will certainly affect our economy over the next year including the world economy, the price of oil and gas, the “fiscal cliff” south of the border, the European debt crisis, unrest in the Middle East and the list goes on and on. We have fared well over the past year, and have essentially bucked against both national and international trends. How long can we be an island in the turmoil the rest of the world is going through? I would suggest that if we see little or no changes in market values over the coming year, we will be doing well.

Eventually we will work through all of the chaos and will return to a “normal” market. in determining how to proceed in this market, one should put a strategy together to anticipate at least three to five years before we see things hit a predictable pace again. It is prudent to work through the pros and cons of purchasing, selling, relocating, upsizing or downsizing and if you feel that is your best strategy for family and peace of mind, I would consider the move sooner than later. If values do trend downward, your own affordability may also start to diminish as the equity decreases in your current home. If you are comfortable with your current location, putting together a strategy to stay put for that three to five years will be paramount.

There is nothing holding one back from looking at properties in anticipation of finding a new home, just be aware that when you do find a property that ticks all of your boxes, there may be a good chance of losing that home if a strong strategy is not in place. I would be happy to to discuss the market further and to put that plan and strategy together with you.
 
Every individual situation will be different on whether one should buy first, or sell first. By ensuring you have a well informed real estate professional assisting and working with you in making educated, well thought out decisions will certainly help minimize any unforeseen turmoil. Let me help you in making sense of it all...





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