Sell first or buy first? Managing settlement risk when you're trading property assets

This guide is for investors, developers and business owners trading one property asset for another.

The current market

House prices fell across every capital city last quarter, the steepest quarterly fall on record. Domain's Nicola Powell says homes are taking longer to sell, there's more room to negotiate, and sellers are having to be more realistic about price. See House prices have fallen in every capital.

That matters because the gap between selling one asset and buying the next is where most settlement risk sits.

Option 1: sell first

Advantages:

• you know exactly how much capital you have to deploy
• no risk of holding two assets and two facilities at once
• a stronger negotiating position as a buyer ready to transact.

Risks:

• you may miss the asset you want while you wait
• for business owners relocating premises, you may need interim arrangements, such as a short-term lease, between the two.

Best suited to: investors and businesses that can't comfortably carry two properties, or are selling in a weak segment of the market.

Option 2: buy first

Advantages:

• you can secure the right asset when it becomes available
• for businesses, you can plan a single, orderly relocation.

Risks:

• your sale may take longer or fetch less than expected
• you may have to service two facilities at the same time
• you may be under pressure to accept a lower offer to meet settlement.

Best suited to: borrowers with strong equity, reliable income from rents or business cash flow, and a realistic view of their sale price.

Tools that can help

1. Longer or delayed settlements

Negotiating a longer settlement on your purchase, or a matching one on your sale, can line up the timing without extra finance.

2. Deposit bonds or guarantees

These can sometimes replace a cash deposit while your equity is tied up in your existing asset. Check the costs and conditions carefully.

3. Bridging finance

Business-purpose bridging finance covers the gap by lending against both properties until the existing one sells. It's a useful tool, but the exit is critical: the loan relies on the sale happening at a realistic price within a set time. See Bridging finance explained.

4. Conditional contracts

Where possible, a purchase that is conditional on selling your existing asset reduces risk. These are less common at auctions and in competitive markets.

Stress-test your plan

Before committing, ask:

• What if the existing asset takes 60–90 days longer to sell?
• What if it sells 5–10% below my expected price?
• Can I service both facilities during that time from rents or business cash flow?
• What is my fallback if it doesn't sell within the bridging period?

If your plan only works when everything goes perfectly, it needs more buffer.

For brokers

• Discuss timing early, before clients sign a contract or bid at auction.
• Get realistic sale price estimates based on current comparable sales, not peak prices.
• Model bridging scenarios conservatively, including interest costs over a longer selling period.
• Remember that Victorian reserve prices are now published 7 days before auction, which helps buyers plan, but auction purchases are still generally unconditional. See Victoria's new auction rules.

The Funding Door view

There's no single right answer to whether you should sell or buy first. The best choice depends on your equity, cash flow and the market for the asset you're selling. What matters most is planning for delays and lower prices before you commit, not after.