You may wonder what will happen when you're selling one home and buying another – how will all the details work out?

This is a common situation and Realtors and lenders have plenty of experience in arranging contracts and loans so that the two transactions dovetail smoothly.

Should you sell your home first then buy or buy first then sell?

Ideally, it’s best to find a home you like and make an offer subject to selling your current home. This generally works in a normal market. However, in a “hot” market most sellers will not accept a “subject to sale” offer. In this case you need to sell your home first and then buy a new home in the interim period between selling and vacating your house.

If you find that you need to buy the next house before you've received the proceeds from the present one, lending institutions can sometimes make you a short-term " bridge" loan to tide you over between the two transactions. Make sure you fully understand the exposure and emotional investment before proceeding with this type of loan.

Once you’ve been given an estimate of market value by your Realtor, you can get a rough idea of how much cash you might walk away with when the sale is completed. This can be particularly useful when you start looking for another home to buy.

To estimate your net proceeds, from the estimated sales amount, subtract the applicable costs in the three sections outlined below: seller’s costs, buyer’s costs and closing costs.

Seller’s Costs (not all may apply):

  • Broker's commission

  • Payoff figure on your present loan(s)

  • Prepayment penalty on your mortgage

  • HST

Buyer’s Costs (not all may apply):

  • Home Inspection (In some cases additional inspections may be recommended or required, i.e: Septic, Mechanical, Electrical, Structural, Air quality)

  • Condominium Status Certificate

  • Mortgage (Down Payment, Appraisal, Mortgage Insurance)

  • Broker's commission (if the seller is not offering one or if there is a shortfall)

  • HST

Closing Costs:

  • Attorney's fees

  • Title Insurance

  • Unpaid property taxes

  • HST

Generally, there is no HST payable on the sale of residential dwellings, only the fees associated with the transaction. However, there are some exceptions. Additionally, as far as closing costs are concerned, you and your eventual buyer may agree on any arrangement that suits you, no matter what local practice dictates.

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