The answer is – it depends on why you are making the move, it depends on the market, and it depends on your financial position.

Remember when you bought your first home? Maybe you were renting or maybe even still living in your family home… either way you did not have to consider the risks – how do you buy when you need the equity you have in the house you currently own? How do you reliably know how much equity you have when you haven’t yet sold the house you currently own?

This is where being prepared and knowing market conditions can help you save money and make the most of your equity.

When it comes to buying and selling when you are relying on the equity from your current home to buy your next home, generally speaking, you should always do the most difficult part first. If the market favours the seller – buy first. If the market favours the buyer – sell first. But it still depends on your financial position and your tolerance for risk.

• The first step is to know your market. Engage a trusted real estate professional to provide you with a thorough market review which includes not only the current market value of your home but all of the costs involved in selling your home, the typical number of days or months it should take to sell and whether the market favours sellers or buyers. They will also be able to let you know what to do to prepare your home for sale so that it will sell for the highest possible price.

Pro Tip: Focus on the data – what have buyers paid for similar homes? How do those homes compare to yours in size, location and finish?

By this point you will likely have already been dreaming online so you will know how much you will need to pay for your next perfect home.

• The second step is to know your financial position. This step is crucial to allow you to know your negotiating position. Check with your lender to see if you would qualify to keep and rent your current home and how you would structure the financing of your new home. For this part of the process, you will need to know how much rent homes like yours are achieving in the rental market. This doesn’t mean you are obligated to keep your current home. If you are pre-approved to carry both properties you will be able to make a more competitive offer on your next home without a “subject to the sale” condition. More on this later.

Pro Tip: If you want to be sure that you find and purchase the perfect next home first do whatever you need to do to get pre-qualified to carry both homes including having a co-signer.

• The third step is to decide what to do first – buy or sell. For this step you need to know yourself and the market. If you want to find the perfect home first and the market favours the seller you could take the chance that if you buy first, your home will likely sell easily.

If you have been pre-approved to carry both properties – but don’t really want to – the worst possible scenario is that the market shifts before you sell your current home and you will need to sell your current home for less or keep and rent it.

If you have not been pre-approved to carry both, and you need to write your offer subject to the sale of your current home, and the market favours the seller – prepare yourself for disappointment. You could lose the perfect home if your offer is competing with other offers if those buyers do not have a “subject to the sale” condition either because they don’t have a home to sell or they are pre-approved to carry both homes.

If you are not in competition the seller will almost always add a “sellers condition” which allows the seller to accept another offer and require you to remove all of your condition within 24 or 48 hours. In a market which favours the seller this will be a likely occurrence.

If the market favours the buyer both of the above scenarios could still occur but you may have a little more time.

If you just want to be absolutely sure of the sale of your home and your equity position before you buy it is still important to check with your lender about the financing terms of your purchase. Has anything changed since you purchased your current home? Has your income or the terms of your employment changed? Have you increased your debt by purchasing a vehicle? It is not a given that you will qualify for the same or an increased or decreased mortgage amount.

In this scenario you would ideally negotiate a long closing date to allow you enough time to find your next perfect home. The risks in selling first are that you run out of time and have not found a home within the time allotted and you have to rent while you continue your search or that the market shifts and you have to pay more than you anticipated for your next perfect home.

During the time your home is listed for sale your trusted real estate advisor will likely have created a customized online search so that you see how often homes with your specific criteria are listed and sold so that you have a good idea of the likelihood of finding that perfect home. Just don’t fall in love until you have received an offer on your current home.

Pro Tip: Beware of guaranteed sale offerings. The terms can sometimes be expensive and eat into your equity.

A trusted real estate professional will help you choose the best path based on your financial position and level of risk tolerance.

We would love to work with you to achieve the best outcome for you!

Please call us at 403-686-1455 or book an online appointment – we look forward to speaking with you!

2021 Record Year for Home Sales

City of Calgary, January 2022

Thanks to exceptionally high sales in December, 2021 was a record year for home sales. Calgary sales reached 27,686 units this year, nearly 72 per cent higher than last year and over 44 percent higher than the 10-year average.
 

“Concerns over inflation and rising lending rates likely created more urgency with buyers over the past few months. However, as is the case in many other cities, the supply has not kept pace with the demand, causing strong price growth,” said CREB® Chief Economist Ann-Marie Lurie.

As of December, the unadjusted benchmark price rose by nearly one per cent over last month and was sitting over 10 per cent higher than last year’s figures. Overall, the 2021 benchmark price rose by more than eight per cent compared to last year for a total of $451,567, just shy of the annual record high set back in 2015.

We are entering 2022 with some of the tightest conditions seen in over a decade. As of December, inventory levels are nearly 25 per cent lower than long-term averages for the month. This will have an impact on our housing market as we move through 2022. More details on the housing market forecast for 2022 will be released on Jan. 25.

View the full report here: December 2021 Statistics Report
 

Persistent sellers’ market conditions drive up prices

City of Calgary, December 2021

Market Continues to Favour the Seller in October

City of Calgary, November 2021

Sales remain strong in September

City of Calgary, October 2021

Market continues shift toward more balanced conditions after torrid start to the year

City of Calgary, September 2021

If you are in a competing bid situation, it is important for you to know your negotiating position. You need to know how many offers are coming in, what you can afford, and what risks you are willing to take. When it comes to submitting a competing bid, you must be aware of which conditions need to be in the offer for your specific situation and which ones you can risk not having on the contract. An experienced real estate professional will help assess and communicate the benefits and consequences of each variable   to help safeguard your interests.

In Vancouver and Toronto there were lots of subject-free competing offers, Calgary has seen fewer. I would only be comfortable presenting a subject-free offer if my client is a sophisticated buyer who fully understands the ramifications of that type of offer..

Whenever I have a client considering entering a competitive bid situation, I ask, “What price will you feel good about and not regret, regardless of which way it goes?” I want to ensure if they lose the bid, they won’t feel like they should have paid an additional $5,000, or if they win the bid, they don’t feel that they’ve paid $10 000 too much. To help the client make that decision, we provide our clients with research about what similar properties have sold for in the area. It is always the client’s decision.

Have a question you would like answered?

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It depends on why the new homeowner is buying. If they are buying because they see the long-term benefit of owning their own homes and they are ready to make the change from renting to home ownership, then buying may be a good choice because of the low interest rates. However, I would recommend they find a good real estate professional who can discuss their personal situation to determine if now is the right time for them or not. In June, we started seeing price reductions and homes coming off the market then coming back on, both are signs that the market conditions are changing.

If they are buying because they want to see a capital increase in a short period of time to make a quick buck, now is not the time to buy. It is likely that we have already seen peak prices. As inventory increases the prices will level off.

When the pandemic has passed and the balance between supply and demand results in prices levelling off, it will be a good time for new homeowners to start looking. In a more stable buying climate, they may not have to compete with others when writing an offer so they can take more time making the right decision for their families.

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Alberta is still largely dependent on the oil and gas industry for its economy and the North American political leaders are taking an anti-oil policy stance, so recovery may be slow. The city is starting to attract sustainable energy companies.

However, it will take decades for sustainable energies to significantly increase jobs in the province due to this sector being relatively new. We have seen growth in the technology and health care sectors which bodes well for the economic future of our economy.

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To judge where a market has been and where it is going, I analyze the absorption rate. Simply put, this rate measures how many properties sell in comparison to the number of properties for sale during the month. As I track this metric over time, I can see the balance between supply and demand.

Let’s look at the largest market segment driving Calgary’s real estate growth, detached homes. In March, the absorption rate was 77.46%, which means 77.46% of all homes for sale in the month of March were sold. In April, the rate dropped to 73.60%. In May, the rate dropped to 59.77% and in June the rate dropped even further to 55.78%. This signals a reduction in demand during normal times, however, in today’s environment this does not mean the demand is shrinking. The buyers are still there, they just have more to choose from as more properties have come onto the market. This is a normal occurrence after a super-heated market like March’s because people realize that they can get a good price for their home. This year it’s a bit different because along with the natural interest in getting the best dollar for a property, those sellers who would have sold in 2020 but were hesitant to list are now listing their homes because they feel safer due to Covid-19 safety protocols and vaccinations.

The next few months will be telling for the Calgary market. If the detached home absorption rate falls below 40%, we will see prices level off and potentially go down a bit.

Have a question you would like answered?

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