Buying a new home is often one of the most exhilarating
events a family experiences. But this excitement can be
replaced by anxiety for buyers who are selling a home at
the same time.
Buyers who are purchasing a new home while selling their old one try to close
on both properties at the same time to ensure a smooth move. Although all parties
may have the best of intentions, the properties may not close concurrently. Buyers
fear the idea of paying for two mortgages at the same time, or moving the family
after school starts.
What can home owners do to mitigate this problem?
"Many borrowers do not think of buying and selling a home as one full transaction,
and therefore, they tend to think of the "buy" and then they are chasing the "sell" transaction," says
Tony Meola, executive vice president of home loans production for Washington
Mutual. "We recommend several strategies to people who are buying and selling
a home at the same time. If a buyer plans properly, he or she should be able
to ease out of the old home and into the new one without too much difficulty."
Meola said that people should first find a qualified real estate agent and
a mortgage expert.
"A mortgage loan consultant from Washington Mutual will pre-approve prospective
buyers for you. As a seller, you should negotiate only with buyers who are pre-approved
to purchase your house," says Meola. "And, have the loan consultant pre-approve
you. As a buyer, you want to know how much house you can afford, so you can present
yourself to sellers as a qualified buyer to purchase the house you want."
Meola also says that it's important to allow extra time in the home buying
and selling schedule if you are buying and selling at the same time. "This
advice seems obvious, but list your house for sale long before you plan on
buying, if possible. When you get an offer, negotiate the escrow period to
accommodate your purchasing needs," says Meola. "If that's not possible, ask
to rent your old house if you haven't closed on your new one -- then you won't
have to move twice."
Sellers may be able to mitigate their concerns by accepting a lower offer
that allows more flexibility on the closing date. "For example, if the high bidder
has to sell his or her house first, you might be better off selling to a first-time
homebuyer," Meola points out.
If you are planning to buy in a competitive market, you may need to make
your purchase before selling your current home. In this case, buyers can
borrow a down payment until their existing home sells. This is called "bridge financing." There
are also common and necessary contingencies that should be included in a purchase
"For example, consider adding a clause stating that your offer is contingent
upon the successful sale of the property you currently own," says Meola. This
contingency prevents the buyer from forfeiting their earnest money deposit, or
making two mortgage payments at once.
"In some competitive markets, buyers make contingency-free offers in order to
be more attractive to sellers," says Meola. "Anyone using this strategy should
plan to obtain interim financing. We advise doing this even if the former home
is sold, but not yet closed. If you make a non-contingent offer and the sale
of your existing home falls out of escrow, you could lose the deposit you placed
on the new home."
Courtesy of ARA Content
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