Kevin Lampen-Smith
Wellington, September 7, 2019
If you have spent years in your current home, you may feel like a first homebuyer again.
A new website www.settled.govt.nz provides a wealth of information for buyers and sellers of real estate. It includes a property checker tool to ensure you know as much about the house you are about to buy as you have lived in – the good and the not so good.
Buying your second (or subsequent) house often is not much easier than your first and looking to sell your property at the same time adds another layer of complexity.
Buying and selling can take a lot of time out of your life, so the best thing you can do to prepare is to make a plan.
Start by thinking about your circumstances. Do you truly understand why it is you want to move and what you’re looking for in your new home? Set out a list of must-haves and things that you are happy to compromise on.
Some primary questions
Think about where you want your new house to be: Do you have a preferred neighbourhood?
Does it need to be close to schools? What public transport is nearby? How big or small would you like your next house to be?
Next, it’s a good idea to get your finances in order. Speak to your bank or a mortgage advisor, so that you have a strong idea of exactly how much you have to spend on your new home. Then, build your support crew. You’re going to need legal advice, a licensed real estate agent to sell your current property, an insurer and a building inspector.
When it comes to selling first or buying first, there’s no right or wrong way to tackle it, but you need to think carefully about your appetite for risk. Both options come with pros and cons, and their own unique set of challenges and pressures.
Some benefits
Buying a house first gives you the luxury of time: (a) You are free to hunt for homes without a settlement date looming on the horizon (b) You are able to consider as many houses as you like (c) you can move at your own pace (d) you can keep searching until you find the property that is right for you.
While time might be on your side, your finances might not be.
To secure the new home, you will need to come up with the money for a deposit, which might be tricky if your equity is tied up in your existing property.
Some liabilities
Buying first means you may suddenly have double the bills to pay, including home insurance, rates and utility bills, as well as absorbing the cost of bridging finance to pay two mortgages. The extra financial strain can sometimes mean sellers pressure themselves into setting a modest listing price for their existing house or accepting a lower offer, just to seal the deal quickly.
Selling first can give you a clear picture of your financial situation.
You will know exactly how much money you have to play with and what you can afford to buy. However, once you have accepted a buyer’s offer, the clock starts ticking towards settlement day.
Some challenges
You may feel added pressure to make an offer on a home that doesn’t exactly fit your needs or Wishlist, because you are so focused on finding a new place to move into.
To avoid this, try to negotiate a long settlement period on your own house – your agent can help with this – to give yourself some breathing room and time to find a new property. This isn’t always possible, so consider what your Plan B will be.
In a tight rental market, it can be very challenging to find short-term accommodation, especially when you aren’t sure how long you’ll need to live there. Do you have family or friends you could stay with? You’ll also need to consider the added costs of moving your belongings twice and paying for storage while you’re between properties.
There are pros and cons to both approaches but making sure you have everything in order (such as your finances) before you start down this road will help ease the stress.
Since your home is likely to be your biggest asset, it is important to prepare for some hiccups along the way and have time or extra money set aside to deal with these.
Building a strong support crew of qualified professionals will make sure you have the advice and guidance you need at each stage of the process.
Kevin Lampen-Smith is Chief Executive of Real Estate Authority based in Wellington.
