~ 6 minute read
I’m back with another interesting case study for you. This time, let’s talk about a question we get asked all the time: buy a new house first? Or sell your current house first?
Especially in the GTA with the hot housing market, what if we sell first and lose out on additional gains, then get caught in a bidding war for another home? We certainly don’t want you to be caught in that situation. So here’s a quick example of a strategy we put together for Billy (name has been changed to protect privacy).
Billy was referred to us by a past client who was able to sell his home in less than 12 hours. Right from the get-go, Billy was asking all the right questions when selling one’s home. He had a clear picture of the type of home he wanted, how much he was willing to pay and when his family wanted to move to their new house. Billy also had some extra funds to purchase a bigger home for his growing family. He was convinced that this next home was going to be the one that they stayed in for the next 10 years. What would you do in this situation? Buy first or sell first?
What Did We Do?
We asked Billy a few simple questions that gave him even more clarity and fit his situation:
- Timeframe? Probably in the next 2 years. There wasn’t a huge rush to selling unless Billy believed that now was a great opportunity to get a return on his investment. That naturally led us to the next question…where would he want to move after selling his property?
- New development vs. existing home? As a buyer, your options are not as limited as you think. In the GTA, there are an estimated 5,000 family homes being built every month! Billy was initially set on existing homes in reputable neighborhoods with great schools, but that quickly changed when he discovered his preference for a brand new home in a flourishing neighborhood.
We brought Billy a list of new developments that met his criteria, and it wasn’t long before we settled on their perfect suburban home.
- Financing? Billy had a stable job with some savings that he was planning to use as a down payment for the next home. That fits perfectly with a deposit structure that the pre-construction home required.
Side Note: A typical pre-construction development requires a total of 20% deposit. It’s broken up into 5% within 30 days of signing, another 10% within the next 60-180 days, and the last 5% upon closing.
What Were the Numbers?
(+) Price of Home Sold 2 Years Later: $1.7M
(-) Price of Pre-Construction: $1.2M
Net Profit = $500K
But wait…aren’t we missing some numbers? If Billy had sold 2 years ago, his house would have only been worth $1.1M. The value of their newly built home is valued at close to $2.2M.
Wow, that’s even better than advertised!
Higher selling price on the existing home. And significant growth in the new home.
We’ll take the humble route on this one and say we helped Billy earn $500K and made him very happy.
What Was Different?
Understanding what Billy was aiming to buy gave his family the ability to make a well-timed and informed decision on their options. They were able to use time and their specific circumstances to their advantage, and they benefited greatly from it! Not only were they able to cover the purchasing costs of a new home, but they also had enough left over to buy that fancy wine cooler his wife wanted too.
We’re just glad we were able to help.
Are you thinking about selling or buying? Make sure you get the right advice as early as possible so that you can give yourself the opportunity to make a great decision like Billy. My track record should speak for itself, but if it doesn’t, test me. Ask me your most difficult questions.
I’ll help you. I’m a man of my word.
RE/MAX Ultimate Realty