Making an Offer on a House Before Selling Yours
You may have found your dream property but have not sold your current home yet. Luckily, you are able to put an offer in. There are many advantages and disadvantages to this. Therefore, it’s important to make sure that you research whether this is the right decision for you.
In this guide, we’ll be looking into how you can make an offer on a house before selling yours, allowing you to make a fully informed decision.
Can I Buy a House Before Selling Mine?
You can put in an offer on a house before you sell your existing property. However, not all sellers will take your offer seriously if you have not sold your first property. Sellers may prioritise other buyers such as cash buyers, first-time buyers, or those who have sold their property. There is less risk of the sale falling through, while also ensuring that they have the funds to purchase the property. The aforementioned parties are also chain free, meaning that there is less chance of delays.
Those determined to sell their current property can live in temporary accommodation until they are able to move into the new home. This gives potential homeowners the chance to find the perfect property.
If you require a mortgage to buy a new property and have not sold your property, the seller may reject your offer. This is because you will not have the guaranteed funds at this stage. You can always seek advice from a mortgage broker to discuss your options.
Read our guide on Making an Offer on a House
How to Make an Offer Before Selling?
Making an offer after selling your property means you will have the finances to proceed with a property purchase. However, if you are determined to buy a house before selling yours, there are certain steps you can take:
Have Finances in Place
The first thing you need to do is make sure that your finances are in place. It’s best to talk to a mortgage lender and receive a Mortgage Agreement in Principle. This will provide proof to the mortgage lender and ensure the seller that you are intending on buying the property.
You should also consider various fees that you will have to pay such as Capital Gains Tax and Stamp Duty Land Tax. Use our Stamp Duty Calculator to find out how much you could owe.
When buying or selling properties, you will need to pay various conveyancing fees. The cost is impacted by various factors such as property value and whether it is freehold or leasehold.
Receive an estimated cost using our Conveyancing Fees Calculator.
Bridging Loans
A bridging loan, also known as bridging finance, is an interest-only loan that is regarded as a short-term solution. They are called bridging loans as they are designed to bridge the gap between the debt and receiving funds at a later date. The application process is much quicker than traditional mortgages. This makes it a popular choice among those who need to move house urgently.
They help people who are purchasing properties as they can alleviate the financial strain while you wait for your funds to come in from the buyer.
Bridging loans have high-interest rates, meaning that you will be expected to pay back a higher chunk of money when your funds come in. Some lenders also charge arrangement and exit fees depending on the terms and conditions of the loan. It’s important to ensure that you discuss your options with a mortgage advisor.
Cash Buyers
You may want to consider accepting an offer from a cash buyer, even if it is lower than your asking price. Cash offers don’t require a mortgage lender meaning there are fewer obstacles to the sale. This means that the home buying process is quicker and more efficient, ensuring that you can position yourself as a serious buyer.
Cash buyers are also chain free, meaning that there is minimal risk of the sale falling through.
Read more about How to Buy a House with Cash.
Don’t Overvalue Your Home
You should hire a surveyor to conduct a Valuation Survey on your current property. This will show that you are aware of the property’s current value. It will also give you a good indication of what to ask for when you put your property on the market.
When you receive a Valuation from your surveyor, make sure that you don’t overvalue your home. While everyone wants to make as much money as possible from their home, overvaluing your property will most likely detract buyers. This means your property is likely to be on the market for a long time.
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Do Market Conditions Play a Role?
The market condition is one of the biggest factors that can impact whether you receive or make a successful offer. If there is a lot of demand among buyers, the seller will most likely feel inclined to accept an offer from someone who isn’t part of a housing chain.
However, if the seller hasn’t attracted many buyers, they are more likely to consider your offer more seriously. This is especially the case if you can prove that you intend to move out of your current property. If you are able to sell your property quickly, you’ll be viewed as a more serious buyer for your new property.
Read more about How Long Does it Take to Buy a House With No Chain in 2023?
Making an Offer Before Selling in Scotland
If you are looking to buy a house in Scotland, the process differs slightly. If you don’t have the funds available when you put in an offer, you won’t be able to make an offer. This means that property chains aren’t seen in Scotland. For those who need a new mortgage, you will have to sell your property beforehand.
Read more on Buying a House in Scotland
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Is it Better to Sell my House Before Making an Offer?
This is dependent on your situation. As with any major investment, there are advantages and disadvantages that you should be aware of.
Here are the pros and cons you should know:
Advantages
- You will have the finances needed to purchase a property
- You will be part of a quicker property chain
- You’ll have a clearer idea of your budget
- The conveyancing process is more likely to go smoothly
Disadvantages
- You will need to move quickly
- There may be extra costs to put your belongings in storage
- You may have to rent a property in the meantime
- You may have a lower budget if you have sold at a bad time
Buying and Selling at the Same Time
When buying and selling at the same time, it is important to be as organised as possible. This will avoid any delays and ensure a smooth and efficient transition from one property to the next.
Here are some things to bear in mind:
Negotiation Period
Negotiations can be a hugely time-consuming part of the conveyancing process. If you are looking to buy and sell quickly, you can choose to arrange a deal with your buyer swiftly. Bear in mind that this may mean that you don’t receive the full asking price. As a seller, it could be beneficial to consider chain-free buyers
Equally, you put yourself in a strong negotiating position as a buyer if you are willing to proceed with the process as smoothly as possible. This can prevent gazumping.
Read more about Negotiating House Price After Offer Accepted
Settlement Contingency
A settlement contingency is a clause in your contract that will prevent debt. It guarantees that your property purchase will only go through once your current property has sold.
Exchanging Contracts
Exchanging contracts as soon as possible means that you will receive the funds for your purchase almost immediately. This eliminates the need for a bridging loan or other short-term loans. In some instances, you may be able to exchange contracts on the same day as accepting an offer.
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Taking Out a Mortgage
Most people who are buying and selling at the time often require a mortgage when moving up the property ladder. Most mortgage lenders accept applications once you have accepted an offer on your house. This is to minimise the risk of selling your home at a lower price point if you are in a buyer’s market.
If you are struggling to sell, you can ask your current mortgage lender if it is possible to rent the property while you purchase another home. If you don’t wish to rent out your property, you can request a second mortgage. However, bear in mind that this can incur higher interest rates. Your lender will also require you to have an excellent credit rating as part of the application. This is to ensure that you can make your mortgage payments on time.
Read more about Understanding the Different Types of Mortgages
Finding a Conveyancer
At Compare My Move, we can connect you with up to 6 conveyancers. Our simple comparison form allows you to compare quotes and save money on your conveyancing fees.
