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Listing a house for sale and buying a home at the same time is no easy feat. Since both of these tasks are relatively complex, it can be hard to coordinate the dates and the financings of the two transactions. While it’s always nice to have your new home ready to move into when your old one sells, most owners aren’t in a position to carry two mortgages if the home for sale stays on market longer than expected. Likewise, you wouldn’t want your home to sell before you find a permanent place to move all your furniture and belongings to.
Here are a few tips for homeowners who are considering putting themselves into this position.
The first thing to consider is that Montreal is currently a buyer’s market. This simply means that there is more inventory than there are potential buyers looking for a home. In this type of market, it’s always advised to sell first. Unlike a seller’s market, you can’t be confident that your home will sell quickly and without a hitch. To avoid paying interest on two loans, you need to make sure your place has an offer in before you put in an offer somewhere else. The benefits of this route is that you know exactly how much money you’ll have for your down-payment and mortgage. The only hitch is the possible gap in which your home is sold but you don’t have a place to move into yet. For those who don’t have a family home or a second residence in Montreal, this could be quite a hassle.
One way of navigating around this is with a contingent offer. You may be able to find a seller who is willing to wait until you sell your home before closing the deal on a purchase. In a buyer’s market it’s more likely that this offer will be accepted. Make sure your home is already on the market before you ask for a contingent offer. The chances that a seller will take you seriously if you haven’t even started marketing your home yet are very slim.
Negotiating on the closing date is an option if you find your dream home before an offer is made on your old one. Instead of the typical 45 day closing period, you could ask for a 3 or 4 month closing date. This isn’t uncommon in Montreal. Most buyers will be open to finding a compromise that is beneficial to both parties.
Lastly, ask your bank about bridge loans. These are temporary loans that use your existing home’s equity to bridge the gap between the sales price of an old home and the price of a new mortgage. The bridge loan is secured to the existing home, and the funds are then used as downpayment on the move-up home. Be wary though, interest rates on bridge loans are quite high, so do your researching before taking one out.
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