Month: January 2014

Challenge: You want/need to “move up” but you need to sell your current home in order to buy (because you either need the equity for down payment, or your debt ratios are too tight to be approved for an additional mortgage).

Many of our clients are in this boat, and the current competitive market makes this pickle especially challenging. Right now it is difficult to compete in the buying process with a contingent offer. (In this case the contingency would be that your home must sell before you can close on the new purchase)

There are a few solutions or options for home owners in this predicament. None are perfect; however, with a great Realtor, the goal can be accomplished.

Option 1: Prepare, list and sell your existing home. You would then obtain a short term rental or interim housing while you look for your new home to buy. This requires 2 moves, but puts you in a much better buying position with liquid down payment, your purchase not being contingent on the sale of of your house, potentially more flexible closing period, and no need to request a rentback period.

*We realize many people don’t want to move twice, so here are a few other options.

Option 2: List your home at fair market value, or slightly below. You will likely obtain more than one offer, be more in control the closing terms, and negotiate a longer closing period which would allow you time to shop for a replacement house. The sale would be “subject to finding a suitable replacement property” within a certain period of time. You can then write an offer “subject to the closing” (rather than the sale) of your existing home already in pending status.

Ideally in this situation you’d be through the inspection and appraisal contingency on the sale of your home when you write the offer to purchase your new home, while still contingent on closing. This is perceived as a stronger position, with no predictable obstacles in the way. The close of escrow of both the sale and purchase would be scheduled simultaneously.

Option 3: You prepare your property for sale, find a replacement home, and write an offer contingent on the sale and closing of your current home. If the offer gets accepted, the status of the sale agreement becomes “bumpable” meaning that the contingent offer can be bumped by another buyer under certain terms and conditions prior to closing.

Option 4: There’s got to be a rich Aunt or Uncle out there somewhere that will give you some “bridge” financing, right??