In the majority of instances, an offer is accepted on an existing home before the homeowner takes any formal steps towards purchasing another property advertised through local estate agents. This is the way it happens for most homeowners seeking to buy a new home, and is often considered to be the normal (and perhaps only) way to do things. However, with no hard and fast rules surrounding the purchasing of a new home, sticking to the ‘rules’ doesn’t necessarily mean that it’s the best way forward for you.
In some cases, for example, you may be in a position where you need to buy a new home before yours has been sold, and doing so could be the best solution when your circumstances have been taken into account.
So, if circumstances dictate that you buy a new home before you’ve sold your existing one – such as if you need to relocate quickly or renovate before moving in – here are a few pointers on how to go about it:
Making an offer on a property before your existing home is sold
While there is nothing stopping you from placing an offer on a property for sale, you will need to convince the seller that you’re serious about the deal. Fearing that without an offer having been accepted on your current home, you may delay the chain and the transaction, it can be helpful to inform the estate agent that you are able to make the purchase without waiting to sell your own home. Showing them how you plan to finance the purchase and/or details from your solicitor, can help to seal the deal.
Being aware of the tax implications
You will need to pay both Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT) when you buy a home before having sold your own, on top of the usual costs associated with home buying.
Let’s look at the two additional costs in a little more detail:
- Stamp duty
Paid on properties worth more than £125,000, stamp duty goes up in accordance with a property’s value, and if you buy your new home before selling your own, the cost will go up by 3% as it will be counted as a second home.
- Capital gains tax
When you own two properties (as you will if you buy a new home before selling your existing one), you’ll pay capital gains tax on the property’s value as they increase.
Understanding the advantages and disadvantages
There are both good and bad implications of buying a home through Dowen Auctions Sales and Lettings before selling your current one, and it’s important to be aware of all of them so that you can make an informed decision based upon your own circumstances:
Advantages:
- Securing your dream home
- Less pressure to sell your own home
- The chance to get a higher offer on your old property
- Move when it suits you
Disadvantages:
- No guarantee that your old home will sell for enough
- The worry of securing finances to buy a new home
- Paying more in taxes, such as Stamp Duty and Capital Gains Tax
Whenever you decide to buy a new home, be sure to work with experienced estate agents who have a sound understanding of the local market, and who will work with you to help you get the best deal possible.
