Buying property before selling: a good idea?

A property project is taking shape in your mind and you are imagining the steps to see it through. If you are already a property owner, the sale of your property will condition your future purchase. This raises certain organisational questions, particularly regarding the timeframe for vacating the property. Have you thought about buying before thinking about disposing of your current property? Well prepared, this can be a perfectly suitable operation provided you have the necessary perspective to secure your transactions.

Buying before selling your property: why?

Several reasons may push you to do so, and the first relates to opportunity. You have just discovered the house of your dreams and do not want to miss out! Obviously, vendors will not wait several months for you and will probably sell to someone who is ready to sign a sales agreement quickly.

The second reason relates to timescales. Signing a sales agreement without having found a property to buy is inherently worrying. You know that in three months’ time, you will need to hand over the keys to the buyer of your property, and finding yourself without accommodation is not an appealing prospect. Buying first protects you from this concern. Moreover, you will have time to fit out your new property and carry out works if necessary.

You are now determined to sign a purchase offer quickly, but need the proceeds from your sale to finance the acquisition. Your bank (or another) can assist you through a loan.

Precautions to take

It is possible that after your purchase, your current property does not sell as quickly as you hoped. This uncertainty leads us to advise two precautions:

• do not be totally dependent on the sale to finance your purchase: the larger the amount you contribute as a deposit, the lower the risk. If possible, consider letting the old property if it does not sell. In short, consider the worst-case scenario from the outset and prepare a backup plan;

• regarding the sale of the property, base your valuation on a low estimate. It would be unfortunate if you were unable to provide the agreed amount for the mortgage arrangement.

Banking solutions

A bank can assist in your transaction in two distinct ways:

• granting a bridging loan, which provides an advance on the sale of your property and allows you to put together the financing for the new property as if you had already sold yours. The principle is therefore to repay this second loan upon sale of the property. Warning, a bridging loan is only valid for one year, renewable once. You will therefore need to repay it within two years;

• proceeding with a sale and purchase, which is similar to the bridging loan but incorporates the transaction into the purchase arrangement for the new property. Thus, if you buy a property for £300,000, the amount granted by the bank in a sale and purchase swells the total loan amount (you could therefore borrow, for example, £370,000). You obtain a single credit line and a single monthly payment that you can optimise over the entire loan term.

Please note that for the valuation of the property to be sold, the bank will only retain 60% on average of the estimate made by a professional for security purposes.

Such a financial arrangement is complex and we advise you to seek assistance from a professional to fully understand what you are committing to and what the consequences could be. Observing the local property market to offer your property at the right price is the first reflex to adopt to make your property dream become a reality quickly!