The property market is shining on sellers right now, but the outlook is a bit more challenging for buyers – and therein lies the rub if you’re hoping to trade up. Selling your own home might be an easy enough process, but to trade up you’ll also have to find a new home, time your transaction well and potentially deal with the vagaries of the rental market, as well as comply with steep mortgage approval requirements. Here’s some advice on coping with the challenges.
Swings and roundabouts
Selling your house and buying another is always a balancing act. In a market where the number of properties for sale is at a historic low, a speedy sale of your half-decent gaff is unlikely to be a problem. Before the start of the pandemic, in early 2020, about 20,000 properties were for sale, according to a MyHome.ie report. That was already low, but by the end of September this year just 13,500 or so homes were on the market – up slightly from 12,700 at the end of June, but it’s still a seller’s market.
Conall Mac Coille, the Davy economist who wrote the MyHome.ie report, says the rate at which prices are rising highlights that, in a supply-starved market, “prices are being bid up aggressively by homebuyers”.
Indeed, transaction prices are growing faster than asking prices. Analysing the limited pool of 450 properties sold during the summer, Mac Coille calculated the transaction price was 6.5 per cent higher than the asking price. So, if you’ve clapped eyes on a house you fancy, the asking price is likely to be an opening gambit. This year will end with house-price inflation at 10 per cent, he predicted. This is all good news if you plan to sell your house, just be prepared for the market to bite back when you go to buy another.
Do your research
The first step to trading up is to be clear about what you want. With so few houses for sale, you need to make sure what you want to buy is available before you list yours. Otherwise, having sold your own, you may face a longer, expensive stint renting or rooming with the in-laws.
The pandemic has rejigged the trader-upper’s checklist, says Orla McMorrow, deputy chief executive at the DNG estate agency. Home working in some form is set to continue, and this is shaping demand.
“Gardens have always been desirable, of course, but they are a bigger factor right now. If a house doesn’t have the space for a home office, a buyer needs to know they can put a Shomera or other ready-made room in the garden. That’s definitely become more of a thing,” says McMorrow.
The de-rigueur open-plan kitchen-living-dining area may be taking a hit too. “Buyers want that option, but they also want to be able to close off a section of it if someone is working from home. They want duality in those spaces.”
Proximity to business districts is falling down the list for some as well. Those selling up in town can get more for their money, with the lifestyle perks much sought in the pandemic, farther out. “Buyers could be looking at a very serious increase in house square footage and garden size for a similar mortgage,” McMorrow says. With flexible working, out-of-towners no longer pay the price of hours on the car or on public transport. An infrequent commute is tolerable.
Be warned, however, that fewer of nearly every kind of home are for sale these days. Data from Sherry FitzGerald showed there were more properties for sale in Munster in 2010 than there were in the entire country in February this year. Indeed, supply had fallen by 70 per cent since the start of the decade, the estate agency said. The decline in stock was "near ubiquitous" across the country, with pressures most acute in Dublin. Things have improved a bit since then, but not much. So if you are trading up, be sure there is at least some of what you want out there or be prepared to pay a premium or face a wait.
Budget
The biggest part of your search criteria is budget, of course. Getting your house valued will tell you how much you may need to borrow to trade up. "Get at least two agents in to value your property and to give you an indication of how quickly it will sell," says Trevor Grant of Affinity Advisors, who chairs the Association of Irish Mortgage Advisors.
Central Bank of Ireland rules mean you are restricted to borrowing 80 per cent of the purchase price, but lenders do have some flexibility, says Grant. “In certain cases the lender can lend up to 90 per cent. A broker will know what’s possible and available.”
Loan approval is the next step.
If your trade-up needs some work to make it work, make sure you have the money to do it. If the works are nonstructural, such as a new kitchen or bathroom suites, the lender may be quite happy to advance the money as part of the mortgage because you have demonstrated repayment capacity, says Grant. If the work is structural, however, such as a kitchen extension, the lender may hold back a sum, releasing it only after works are confirmed complete in accordance with building regulations. So if trawling the property listings shows you what you want and can afford is available for sale, it’s time to mobilise.
Chain gang
Next is the white-knuckle bit. With stiff competition among buyers, the most nimble and chain-free will be favoured. “If you have yet to sell your house, you will be at the bottom of the list,” says DNG’s McMorrow. You will have to sell before you can trade up, that’s the reality. Or at least be sale-agreed. Put yourself in a strong position, either with your property sold and you in rented accommodation, or with a signed contract on the sale of your property. You can still elongate your closing date. If you are in that position, you would be considered a strong buyer,” she says. “You really have no hope unless you are in a position to sign a contract and pay your 10 per cent deposit.”
Dovetailing the sale of your house with buying another is tricky but possible, according to Grant. “I’ve a couple of live cases at the moment where people are literally buying and selling on the same day,” he says. “You do have the slight flexibility that you can go sale-agreed at both ends without having to sign contracts.”
Unlike with purchasing a new home, when contracts are time-limited, you might have the guts of two months before having to sign, he says. “If the person you are buying from knows you are sale-agreed in your house, that takes the pressure off.”
A vendor who waits for a bidder to sell theirs first risks getting entangled in a chain. “They are at the bidder’s mercy – the bidder could be looking for too much for their property, or there may be a title or planning issue. This is where you get the horror stories,” says McMorrow. If you are chain-free or near chain-free, you are more likely to win the day than a higher bidder still chained.
Fail to prepare
When selling and buying simultaneously, timing is everything. You can do a lot to eliminate risky delays. Lenders are notoriously slow at releasing title documents. This can take up to six weeks – enough time to sink a sale.
“Once your approval in principle arrives, ask your solicitor to take up the deeds on ‘accountable trust receipt’, to ensure that everything is in order for the sale,” says Grant.
McMorrow agrees. “If you agree to buy a house and you are selling yours, you’ll be asked, ‘Well, are your contracts out or are you still waiting to get the title deeds?’” Parties can be reluctant to incur legal fees for a sale that may not ultimately proceed, says McMorrow. “But this can come back to bite them if they are late sending a contract to a buyer.” A six-week delay gives your buyer time for second thoughts.
A solicitor will also square any outstanding local property tax and apply for principal-private-residence relief. Making sure any building works, such as an extension or attic conversion, have the proper certs and can also be ticked off. The property may also need a land-registry compliance map to make sure the boundaries are correct. Getting mortgage protection sorted in advance will save time too. Sorting out all of this in good time will grease the wheels of your sale, putting you in prime position to trade up.
’Tis the season?
Many vendors are now putting off selling until the new year – which makes right now a great time to sell, says McMorrow. “If you are looking for top dollar, my advice is to go now before Christmas.” Sellers can be put off by the bad weather and the fact the garden isn’t looking its best, but a pretty garden isn’t where the market is at right now.
“If you go to market in the next week or two you will find a buyer before Christmas, but you are not going to exchange contracts until well into January, and then agree a long closing date for March or April,” she says. “You will find something to move to within that time frame.”
