Buy First or Sell First?

If you are selling one home and buying another, sooner or later you face the classic question: which comes first? Buy first, and you might own two homes at once. Sell first, and you might have nowhere to go on closing day. Both worries are real, and both can be managed.

This guide explains the pros and cons of each approach, the tools people use to bridge the gap, and what to ask your mortgage professional and lawyer. It is general information only. The right answer depends on your finances, your health and the market at the time, so please get personal advice before you commit.

Option 1: Sell first

Selling first means you accept an offer on your current home, firm up the sale, and then look for your next home knowing exactly how much money you will have.

The advantages

• Certainty about your budget. You know your sale price and can shop with confidence.
• No risk of carrying two homes. You will not be paying two sets of property taxes, insurance and utilities.
• Less financial pressure. You are not depending on your house selling quickly at a good price.

The disadvantages

• Time pressure to find the next home. If the right place does not come up before closing, you may need temporary housing.
• Possibly two moves. Moving into a short-term rental and then again can be hard, especially for older adults.

An example: a widow selling a North York bungalow may prefer to sell first because she does not want any debt at all. She chooses a longer closing date to give herself time to find a condo, and her daughter offers a spare room as a back-up if needed.

Option 2: Buy first

Buying first means you secure your next home, then sell your current one.

The advantages

• You don’t miss the right home. If the perfect bungalow or condo comes along, you can act.
• One move. You can move directly from one home to the next, sometimes with time to prepare the new place first.

The disadvantages

• Risk of owning two homes. If your current home takes longer to sell, you carry both.
• Pressure to accept a lower price on your current home because you need the money.
• Financing you may not want at this stage of life. You may need a bridge loan or mortgage, even briefly.

What carrying two homes costs

If you might own two homes for a while, list the costs ahead of time:

• Interest on any bridge loan or mortgage
• Property taxes on both homes
• Insurance on both homes (tell your insurer if one will be empty, as policies may have rules about vacant homes)
• Utilities, snow removal and lawn care at both
• Condo fees, if one is a condo

Bridge financing in plain language

Bridge financing is a short-term loan that “bridges” the gap when you need money from your current home to complete the purchase of your new one, but your sale closes after your purchase. For example, if you buy a condo that closes on May 1 and your house sale closes on May 30, a bridge loan may cover the down payment for that month.

Some general points to understand:

• Lenders usually expect to see a firm, unconditional agreement of sale on your current home before they approve bridge financing.
• Bridge loans are generally meant for short periods, and there are interest costs and often fees.
• Each lender has its own rules about how long a bridge can last and how much it can be.

Ask your mortgage professional how bridge financing would work for you, what it would cost, and what would happen if your sale fell through.

Conditional offers and the sale of property condition

When you make an offer on a new home, you can sometimes include a condition that your purchase depends on selling your current home by a certain date. This protects you from owning two homes, but it has trade-offs:

• Sellers often prefer offers without conditions, so a conditional offer can be less attractive, especially in a busy market.
• A sale-of-property condition may be paired with what is often called an “escape clause”, which can allow the seller to keep marketing their home and, if another offer comes in, gives you a set time to remove your condition or step away.
• The wording matters a great deal. Your Realtor and real estate lawyer should review any condition before you sign.

On the selling side, if a buyer makes an offer conditional on selling their home, you face the same questions in reverse. Ask how long the condition lasts and what happens if a better offer arrives.

Coordinating the closing dates

The closing date is the day ownership changes hands and the money moves. Lining up your two closings is one of the most effective ways to reduce stress.

1. Same-day closings. Some people close both on the same day, so the money from the sale goes straight into the purchase. This is efficient but leaves little room if anything is delayed.
2. A small overlap. Buying a few days or weeks before selling gives you time to move, clean and settle, but usually requires bridge financing.
3. A small gap. Selling a little before buying avoids carrying two homes, but you need somewhere to stay in between.

Your real estate lawyer will handle the closing paperwork and can tell you how much time they need. Tell them early if your sale and purchase depend on each other.

Rent-backs and extended closings

Two other tools can help you avoid a rushed move:

• An extended closing. When you sell, you can ask for a longer-than-usual closing date to give yourself time to find and buy your next home. Not every buyer will agree, but some will.
• A rent-back (or lease-back). After your sale closes, the buyer agrees to let you stay in the home for a period, paying rent. This needs to be clearly written into the agreement of purchase and sale, including the length, rent, insurance and what happens if you need to stay longer. Your lawyer should advise on the terms.

Qualifying for a mortgage on retirement income

Many older buyers are surprised to find they need a mortgage or bridge loan, even briefly, and wonder whether they can qualify without a salary. Lenders look at income from many sources, which can include pensions, government benefits and investment income. According to the Financial Consumer Agency of Canada, lenders look at your income before taxes, your expenses, your existing debts, your credit report and score, and the amount you want to borrow.

Federally regulated lenders such as banks also require you to pass a stress test: you must show you could afford payments at a qualifying rate, which is the higher of 5.25% or your negotiated rate plus 2 percentage points.

Frequently asked questions

Which is better, buying first or selling first?

There is no single right answer. Selling first is usually lower-risk financially; buying first can be easier emotionally and practically. Your Realtor, mortgage professional and lawyer can help you weigh it for your situation.

Can I get bridge financing at my age?

Age alone is not the deciding factor. Lenders look at your income, debts, credit and the firm sale of your current home. Speak with a mortgage professional for your own answer.

Can I stay in my home after it is sold?

Sometimes, if the buyer agrees to a rent-back or a longer closing. It must be negotiated and written into the agreement.

How Irina can help

Timing a sale and a purchase is one of the things an experienced Realtor helps with most. Irina can give you a realistic sense of how long your home may take to sell and what it may sell for, and can help you plan closing dates that suit you. She is happy to have a no-pressure conversation in English or Russian. Contact her whenever you are ready.

Related guides: Timing the Sale and Your Next Move · Buying After 60 · Renting After You Sell