Bridging Loans | Subject to Sale | Sell First
Moving home is rarely a simple "A to B" transaction. Whether you are upsizing for a growing family or downsizing for retirement, the biggest hurdle is often the gap between selling your current home and buying the next one.
In the current Southeast Queensland market, where housing stock is tight, choosing the right financial strategy is just as important as choosing the right suburb. Here are the five primary ways to manage your next property transition.
1. Retaining Your Current Home as an Investment
Before you sell, consider if your current home could become a long-term wealth-building asset.
- The Portfolio Play: If you have enough equity and borrowing capacity, keeping your current home as an investment property allows you to build your portfolio. Using the equity in your home to buy the next often means financing 100% of the new property and avoids the costs associated with selling. For those fortunate enough to have this as an option, there's always peace of mind knowing you could sell at any time, should the loan repayments become unaffordable.
- The "Mental Load" Factor: Not everyone loves the idea of being a landlord. Consider whether you want the responsibility of property management or if you prefer a "clean slate" for your next purchase.
2. Buying "Subject to Sale"
This is the most common 'ideal' solution for buyers who want the security of knowing where they are going before they let go of their current home.
- The Benefit: It eliminates the risk of being "homeless" or forced into a short-term rental. Keeping in mind, you will typically be handing over the old keys and picking up the new keys on the same day.
- The SE Queensland Reality: In a rising market, a "subject to sale" clause can weaken your offer and is likely to delay your purchasing timeline. If a seller receives two identical offers - one unconditional and one subject to sale - the unconditional offer will almost always win. This strategy often requires a higher offer price to compensate the seller for the uncertainty.
- Key Dates: Buying "subject to sale" requires you to meet milestones like "under contract", "unconditional" and "settlement" within specific timeframes. The seller may also request a "sunset clause" which allows them to accept another purchase offer during this time, so it's best to have a conveyancer review the fineprint before signing anything.
3. Utilising a Bridging Loan
A bridging loan is a strategic tool that empowers you to act quickly and maximise your financial outcome. By removing the "subject to sale" condition, you become a much stronger buyer, significantly increasing your chances of securing a property in a competitive market. In Southeast Queensland, where a $1.5m property can jump to $1.6m in just a few months, the ability to buy immediately can save you tens of thousands in market growth alone.
This strategy also eliminates the cost and stress of double-moving or renting. By moving into your new home first, you have breathing room to properly prepare, stage, and present your previous property. A vacant, well-presented home is likely to attract more interest and achieve a premium sale price, often offsetting any additional cost of a bridging loan.
- For Downsizers: Even if you own your home outright and are retired, there are lending options available. A bridging loan facilitates a seamless move into your next chapter without the pressure of selling first.
- For Upsizers: We can use the equity in your current home to establish your maximum purchase price. This allows you to secure your larger family home with confidence, knowing you have the time to move at your own pace, then run a high-impact sales campaign to get the best possible result for your current asset.
4. Selling First (The Cash-Ready Buyer)
Keeping your property as an investment or using a bridging loan is not always possible.
It's a big decision to sell before knowing what's next, however, listing your home for sale first, can turn you from the less desirable "subject to sale" buyer, to a highly attractive buyer with less (or no) conditions.
- Certainty: You have sold your home without the pressure of "subject to sale" or "sunset" clauses hanging over you, and you know exactly how much cash you have in the bank. You aren't relying on "conservative estimates" from a bank or agent; and you can be pre-approved knowing your absolute maximum loan repayments and purchase price.
- Negotiating Power: Being a cash-ready buyer allows you to move quickly when the right property hits the market.
- The Risk: The primary risk is the gap between properties. You may need to move into temporary accommodation or a rental if you don’t find a new home immediately.
- The Ideal Situation: Many of our clients have had success in selling to an investor or 'next home' buyer; they negotiate a quick settlement to secure cash in bank, but with an agreement to rent back for a few months to give you time to find the right property. Buyer's Agents can also be a great asset to help locate your next home within a short timeframe.
5. Buying with a Long Settlement
This is a high-risk, high-reward strategy used by those who find their "dream home" before their current one is even on the market.
- How it works: You negotiate a long settlement (e.g. 60-90 days) on your purchase. You then rush to list and sell your current home within that window (e.g. 30-60 days) to align the two dates.
- The Risk Factor: From the seller's perspective, you are unconditional. If your home doesn't sell for the price you need or within the timeframe, you may face significant financial penalties. This is only recommended for those with a high risk tolerance and confidence in their home’s marketability.
Which Strategy Is Right for You?
Every move is unique. The right strategy depends on your financial position, your risk appetite, and the current local market conditions.
Reach out today for a confidential strategy session. We’ll help you run the numbers, assess your bridging options, and ensure you’re in the strongest possible position to secure your dream property.