Selling before buying: how to do it

When you sell your current home first, you know your exact budget for the new one. You know what you can bid before you go after anything else, and you avoid being stuck with two homes at the same time.

In a more challenging housing market, it is always best to sell your existing home before you buy a new one. That way, you do not tie yourself to something you may not be able to finance, and you do not have to speculate about whether the sale will go through in time.

Be aware of the biggest drawback right from the start, though: the risk of being temporarily without a home if the purchase drags on.

Checklist before you sign anything

• Contact your bank and get a clear overview of your finances.

• Contact a lawyer and an estate agent before you put your home up for sale or bid on a new one.

• Plan the handover dates when the purchase and sale agreements are drawn up.

• Consider temporary accommodation in case the timeline slips.

Sell first or buy first? Pros and cons

Whether you sell your current home first or buy the new one first makes a crucial difference. The choice affects your finances, your timeline and your peace of mind. Some people end up buying and selling at the same time because the timelines overlap.

Here are the key differences between the two strategies.

If you choose to buy first, you can use a lawyer’s reservation (advokatforbehold) and add a sale clause to the purchase agreement. The deal then becomes conditional on you selling your current home, and you are not left with two homes if the sale drags on. That is how you make buying first safer.

Whichever route you choose, you should coordinate both agreements so you are not left without a roof over your head. Set the handover dates close together, and avoid double housing costs, interest or commitments in the meantime. Most problems arise precisely in the transition between the two transactions.

Before you sign anything, you should look into your tax position and ask an accountant if you are in doubt. Also include the selling costs in your budget: the estate agent’s fee, a lawyer, tinglysning (registration of title) and change-of-ownership insurance. These items can quickly eat up a large part of your equity, and they need to be included before you work out how much you really have for the new home.

Plan your sale with a valuation, preparation and the right timing

If you only assess the price and the market when the agreement is about to be signed, you have nothing to negotiate with. That is why your plan should be in place before you commit to anything at all.

1. Get a free valuation of your home from an estate agent. It is often the first step, and the agent values your home based on experience, local sales and the condition of the property.

2. Get more than one valuation from different estate agents. An agent also has an interest in winning you as a customer, so the valuation may be a little optimistic. Several valuations give you a more realistic price level.

3. Make the small improvements that lift the overall impression. Even minor changes can make a big difference to the valuation and to the final sale price.

4. Check the local market before you put your home up for sale. Look at how many similar homes are for sale in the area, how quickly they sell, whether prices are stable, rising or under pressure, and what type of buyer typically looks for your kind of home.

The order is no accident: the valuation gives you the price level, the improvements raise it, and the market check tells you whether the time is right to sell.

Conditional purchase agreement and sale clause: what you need to know

A conditional purchase agreement is a legally binding contract that only takes effect once the agreed conditions have been met. The most common condition is that you, as the buyer, must have sold your current home within an agreed period, typically between two and six months. Until then, the deal is not final but an agreement with an expiry date, waiting on your sale.

If the condition is not met, the purchase agreement generally lapses, and you are not obliged to buy. You are not stuck with a purchase you cannot finance because your old home is still unsold.

A sale clause in the purchase agreement must be precise if it is to protect you. A clause that simply says the deal is conditional on your sale gives you nothing to hold on to when a disagreement arises. As a minimum, it should specify:

• The specific outcome that must be in place before the condition is considered met.

• Who decides whether the condition has been met.

• What documentation shows that the condition has been met.

• When the deadline starts and expires, including the time of day.

• Who must be notified, and in what form the notice must be given.

The seller can often carry on marketing the home, even though you have a conditional agreement in hand. The seller can enter into a new agreement with another buyer if a better offer comes in during that period.

If that happens, the seller can require you to waive the condition about selling your own home. You typically get three to four working days to reply. If you choose to keep the condition, you must expect the deal to slip through your fingers.

Bridging finance when your sale and purchase fall out of step

Sometimes the timelines cannot be made to fit, and then you will need bridging finance (mellemfinansiering) when moving home. It is a temporary loan that covers the difference between the price of the new home and the amount you expect from selling the old one. You are not borrowing for the whole of the new home, only for the gap until the sale proceeds land in your account.

The loan typically covers the down payment of around 5 % of the purchase price and other cash needs until the sale goes through. If, for example, you need to put down 150.000 kr. as a down payment, that amount can be covered temporarily, so you do not have to find the money from other sources right now.

The bank takes security in your current home without changing the existing mortgage deeds. The interest rate is usually variable and follows the bank’s rates for short-term credit, so it can move with the market for as long as you have the loan. Factor those swings into your calculations in case the sale drags on.

To get an offer, you normally need to show the purchase agreement for the new home and documentation for the sale of your current one, for example an agency agreement or a valuation. A valuation from an estate agent is almost always required, because the bank wants to see an up-to-date valuation with a realistic price and an expected time on the market. If you do not have one yet, the first step is to get it done before you apply for bridging finance.

Your plan for selling before you buy, and a free valuation from Brikk

• If you sell first, you know your budget and avoid owning two homes at the same time.

• Set the handover dates close together, and have a temporary housing plan ready in case the purchase drags on.

• A conditional purchase agreement and a sale clause can protect you if you do bid on a home before your sale is final.

• Bridging finance covers the down payment and the double costs during a transition period.

Brikk can get you started with a realistic price level to plan around. Brikk offers a free, completely no-obligation valuation with your local expert, and you should book it early in your sales plan. That way, you have a concrete figure to base your home purchase on, and you can plan the sale around it instead of guessing.

Book a free, completely no-obligation valuation with your local expert now. Get a free valuation.