Buying guide

Guide: Selling & Buying a House at the Same Time

We break down what you need to consider when buying and selling at the same time.

Selling and buying a house at the same time is a juggling act many New Zealanders perform at some point. And it’s popular in the current market where buyers have more power and can make offers conditional on selling their home. However, there’s no doubt that buying and selling at the same time is more complicated than selling first and then buying.

To help you navigate this process, we’re going to look into the variety of ways you can do this, depending on your risk comfort levels.

Selling and buying a home at the same time: your options

1. Buying first

Choosing to buy a property first and making your offer conditional on the sale of your existing home is quite popular at the moment. You have to be aware you’re taking on some risk with this because, in this slower housing market, you don’t know how long it’s going to take to sell your own home. Typically you’ll commit to selling within eight weeks with an option to review if it takes longer.

A couple of things to note:

The vendor of the property you’re interested in will usually include a “cash out clause” in the sale and purchase agreement. This means they can accept another more straightforward offer at any time, typically giving you three to five days’ notice to come up with the finance to buy the home without conditions.
If you’re putting in an offer with conditions that’s competing with unconditional offers, your bid will have to be at an attractive price to tempt the seller, so you won’t be getting a bargain.

Before making a conditional offer on a property, talk to your bank or finance company about the possibility of arranging bridging finance as a backup option if your house doesn’t sell by the deadline. Be warned, in the current climate, they're likely to say this won’t be possible. As senior Loan Market mortgage adviser, Bruce Patten says, “Almost universally, the banks are not providing bridging loans unless you have the ability to take on the entire debt of paying the mortgage on both properties.”

There's no doubt that selling and buying at the same time is a careful juggling act.

Bridging loans - how do they work?

If the market changes, and bridging finance, or a bridging loan, returns, here’s what you need to know about this short-term loan. There are two types of bridging loans in New Zealand:

1. Open bridging loans are for when:

You haven’t yet finalised the sale of your property, and don’t have a set date by which your home will be sold
You’re seen as a greater risk by the bank and will have to have more equity in your property than the next option.

2. Closed bridging loans are for when:

You’ve got a predetermined date by which your property will be sold and are seen as less risky by lenders so they require less equity.

The cons of any kind of extra home loans:

Additional payments: for a time, you’ll be servicing two loans simultaneously, and you’ll need to be able to service both.
Increased debt: if your current home sells for less than you expected, you’ll end up with greater debt than you planned for due to having to pay off the bridging loan too.

You can talk to a mortgage broker about your bridging loan options.

2. Selling first

There’s no doubt your life will be infinitely easier if you sell your existing home first, and then buy, even if it means you have to rent for a while until your ideal home comes along. You can also set a lengthy settlement date on your existing property to give yourself more time to find your next home.

The argument for doing the transactions in this order is strong. In the current market, as a cashed up buyer, you’ll be hugely attractive to vendors wanting closure. You may still need to get finance pre-approval for your next purchase but you’ll be bringing excellent equity with you.

3. Buying and selling at the same time

Lastly you could choose to do a double act – of putting your home on the market while actively looking to buy your next house at the same time. This way, you’ve done the work of getting your house ready for sale, you’re aware of any problems with the house you have to fix before the marketing starts, and you’ve got a decent idea of what your home might sell for because you’ve had agents view the home and give their appraisals. The same adage applies in all cases – ‘buyer beware’. Always have one hand on the calculator and the other on the contracts – this is one battle where you want your head to win over your heart.

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*This information is not intended as a complete guide, as it doesn’t consider your individual needs or financial situation. Trade Me accepts no responsibility or liability for any inaccuracies or omissions in the content. Always obtain independent legal advice before buying or selling property.