Question 1
Should I buy first or sell first?
It is always difficult to choose whether to buy first or sell first. Either choice creates its own problems and risks.
Buy First
If you decide to buy first, you run the risk that you will not be able to sell your own house with an entry date at, or close to, the entry date for your purchase. If this happens you will almost certainly need a bridging loan, unless you have enough available other funds to make the purchase without the use of the funds from your sale.
Worse still, you may not manage to conclude a missive for your sale before the entry date in your purchase. Here too you may find yourself unable to carry out your purchase contract unless you have other available funds. In this situation the Seller will usually have to resell the property. You will then be liable for all the losses suffered by the Seller, including any difference in the sale price offered in the re-sale, and the interest loss suffered by the Seller.
It is also likely that your bank will not be willing to offer a bridging loan in a situation where you do not have a concluded missive for your sale. This is referred to by the bank as “open-ended bridging” and in many situations will not be entertained by your bank. Your bank may be prepared to consider open-ended bridging if you are able to show that you have enough other available, realisable assets to lessen the bank’s risk.
Unless you are confident about selling your own house, it is wise to approach your bank at an early stage to find out whether they would give you a bridging loan, should it ever be needed.
Sell First
If you decide to sell first, the main risk is that after you have sold, the entry date in your sale will come before the entry date in your purchase, or even before you have found a house that you want to buy.
In this situation, you will have to find other accommodation. There may be suitable property for lease, but most leases are for a minimum period of six months. On top of this, you will face storage costs for your furniture.
Important factors that will affect your decision to buy or sell first are:
- Whether living in short term alternative accommodation would be a bigger problem than the cost of a bridging loan.
- Whether a bank would offer you a bridging loan.
- The state of the property market at the time. Whether it is a Buyer’s or Seller’s market, and the state of the market in the areas where you are selling and buying, will all be important factors.
