I mean obviously, it happens all the time, but as a contingency planner by nature, the logistics are kind of boggling me.
We’re toying with the idea of selling our condo to buy a house in the next year or two, and we should have a decent chunk of equity that will eventually be a down payment, and we will build up some more cash savings (for earnest money, etc.) But I don’t anticipate willingly getting into a position where it’s possible that we’d own two homes simultaneously. So I imagine we’d put our place on the market first, but I don’t know that I’d want to commit to buying a new place before the sale of the current place closed. I know bridge loans exist for this purpose, but my mind can’t stop obsessing over the idea that at the exact moment when we owned 2 homes, the economy would crash again and we’d be screwed. Or the sale would fall through for some reason…maybe multiple times…
I wouldn’t mind possibly renting a place short-term and putting our stuff in storage between homes, but what about the cats? Especially if we really had no idea how long it would be? What if we bought a new place that needed a fair amount of rehab before it was really livable? We really don’t know anyone who could take in 2 cats, or 2 extra people for more than a few days. And my crappy lungs will not do well with construction dust and fumes.
So, folks who have done this before (the condo was a first real estate transaction for both of us), how did you make it all work? Mortgages take time even if you queue everything up ahead of time, and you can’t really queue everything up until you decide on a property to buy and an offer is accepted. Though I sure know we’re not going back to our initial lender - I kept asking at each stage if there were any more documents we would need to provide, so we could collect everything, and was assured there weren’t. Until, of course, invariably there were, and they had to be provided within 24 hours…
Sometimes I think maybe we should just remember what we said when we moved into the condo, which was “yay, we never have to move anywhere again until one of us is too decrepit to get up half a flight of stairs!” But I want a yard, and garage and/or basement, and no stompy upstairs neighbors in the middle of the night! And I don’t want to have to do a full-scale move into a year-long rental, and then another full-scale move a year later.
In this area (Kansas City), most (maybe only some - but it is how ours worked and other people I know) contracts have a contingency on the current house selling - so you basically sell your existing house at the exact same time as you buy your new one. I have heard of chains 3 to 4 houses deep.
Probably helps that the local market never got terribly crazy.
You can put a contingency in your offer that stipulates you have to sell your old home first, or you can find a rental that allows cats.
But let’s take the worst case scenario. Suppose the sale of your old home falls apart?
In that case, you forfeit your deposit on the new home and walk away from the sale. That will cost you $X.
Can you afford to lose $X, at least until you line up another buyer and get paid for your old home? Then you can deal with the other possibilities that cost less than $X.
Sure, we have those, too. But how does one jiggle the chain such that you aren’t between homes for any significant or unpredictable chunk of time? Presumably whoever you are buying from is likely to have the same issue, and on down the line.
I guess at some point in the chain, maybe someone is buying a place that’s already vacant…
Depends on the size of $X. It wouldn’t be the end of the world, and it would be cheaper than a year lease (or possibly even cheaper than the amount of equity we’d otherwise build up in a year of owning, plus moving costs). But it would be a few thousand bucks at least, which I’d much rather use on, say, remodeling. Surely there are other solutions?
(Rentals that allow cats aren’t a huge issue. At least we don’t have dogs. If I knew it were short-term, even a corporate hotel or something wouldn’t be horrible, but I’m not sure whether those allow cats. And cats can’t be put into storage! At least the authorities frown on that, and I’d miss the little buggers anyway.)
About 3 1/2 years ago I did just what you are considering - I sold my condo and moved
into a small house. The sale of my condo was contingent on my finding a house and
the bank willing to loan me the money to purchase the house. If I remember correctly,
agreements were made between the buyers and sellers such that the new owner
of my condo would take possession two days after I took possession of the
house. In other words, for two days I owned both the condo and the house,
and at the end of the two days the condo transferred to the new owner. This
gave me two days to move everything. Fortunately the move was a short one - about
5 miles - and there were no cats involved.
I would advise you to talk to some real estate agents - they can walk you
through the whole process and answer any questions you might have.
Here in the UK it’s standard to set up a ‘chain’ of people wanting to move and agree a common time for their lawyers to sign the papers.
For example, my parents wanted to move to a bungalow in a country town (near me.)
The bungalow owners wanted to move into a country cottage outside the town.
(I don’t know about what the cottage owners wanted.)
We waited until all parties had agreed sale prices, removal vans and financing, then instructed all our lawyers to sign the papers simultaneously.
And in Spain that kind of chains are often set by working through a single agency; there are also agencies which will buy your old house when they sell you the new one. The round of signatures at the notary/registrar can get pretty interesting, between mortgages being closed down, new ones being created and the actual property contracts.
When I bought my house, the owner (Javi) was buying his new one from a friend; the friend had no problem waiting, but Javi still wanted to sell ASAP both because the sooner he moved, the sooner he could start fixing the place, and out of courtesy for his friend. The two of us and a guy from my bank went to the notary together, along with a note from his bank authorizing my banker to represent them in closing Javi’s mortgage. His own purchase was on “direct loan”, so no banks involved, just the former and new owner (he was going to pay installments directly to the friend) at the notary.
In Norway as well you usually take out a bridge loan. Whether you make sure you have your house sold first or not depends on how you feel about the cost of owning two homes at the same time and your evaluation of the current market, which way it’s moving and the estimated time to sell.
To use myself as an example I knew there weren’t many homes available meeting my specifications, so I bought a place first, and ate the cost of my old place not selling until a couple of weeks after I paid for the new.
If you’re worried about not selling you can buy first and stipulate that you have to sell the old place before closing, but the seller might accept an offer of a sure thing instead, even if it’s a lower bid.
Or you can sell first and hope you aren’t forced to buy something less than ideal when the time to move arrives.
We did it with our fingers crossed and a bridge mortgage.
It helped that there was no mortgage on the first house so we just came up with the 20% on the second for the down payment, and that we were moving into an inexpensive area. But I was nervous until the first one sold.
When I was considering buying a new house a few years ago, I had an offer on a property. In addition to the usual conditions of an offer (financing and inspection) I had the sale of my current house. I had the option of lifting that condition if my house didn’t sell before the closing date, in which case I would have had to arrange financing to carry both properties. In the end, the new house failed on inspection, and I backed out of the deal. Deposit was returned.
As others have suggested, you can make the purchase of your new home contingent upon the sale of your current condo. You can also include a “rent to own” clause, where you will pay $xxx a month to the current owners until you can close on the new house.
We did this two years ago. What happened to us is that our first house sold super fast, and it took us a while to find a second house we liked at the price we liked.
We wound up in a short term rental for three months. We found a place the first month, and by the time we closed, we had a little over one month to make some renovations on the new place.
Yes, and usually at some point the chain stops: a new buyer or someone selling to move in with relatives are the most common causes. That’s why you sometimes see “no chain” on estate agent adverts and why new buyers can sometimes get a property at a lower price.
I know the US market is different, but in markets with lots of movement, like I suspect it is where Eve lives, it’s likely that there are also lots of chains rather than people selling then moving.
I’m going through a related experience right now, but we rent and went under contract on a house in July. Everything was going great, until the sellers (who are doing what you asked about in the OP) ran into big mold problems with the house they had gone under contract with. Turns out that place is basically unlivable, so, 2 weeks before both closings, they had to back out of their contract with us (as them having a place to buy was a contingency of the sale in our contract).
So, we’ve extended our contract with them through mid-Sept, and they are desperately looking for something else to buy. Meanwhile our lease is up Sept 1st. So, we had about three weeks to scramble to find a place to rent month to month that would take a cat. Everything is going into storage this afternoon (which is when I had originally booked the movers) and we’re moving to a small furnished apartment early next week.
Maybe it’ll work out and the sellers will find a place to buy and we’ll get the house, albeit a few months later than planned. Probably not. But we’re in limbo for a while.
(that doesn’t exactly address your OP, and I apologize if it’s not relevant, but it’s kind of pressing on my mind at the moment!)
About getting everything lined up in advance; lenders and real estate agents do this kind of thing all the time, and if they are good at their job, they should be able to communicate all the steps and how they work together. Basically there’s a ~6-8 week period of time between making an offer and closing, and all the steps fit into place within that time frame. Getting a pre-approval from a lender in advance makes things go more quickly, and enables you to make a stronger offer when you make your offer. It’s ok if you don’t know the house. Do some research about what properties cost in the area you’re looking at, figure out what you think you can afford, and make a guess. “Hi, we’d like to get pre-approved for $200k to buy a house in Townsville.” If you find something more expensive you just contact the bank and ask to get pre-approved for the higher amount, but the initial work has been done.
The process may require a certain ruthless abandon in setting a sale price for your existing home. You would not have the flexibility to set the price high and wait for just the right buyer.
Be aware that, in the US, not all realtors will accept a contingency contract. We ran in to that issue when we sold/bought a few years ago. I resolved it by retaining the agent for the house we wanted to buy as the agent to sell our house. The promise of 2 commissions at the same time was a huge incentive, and he made it happen!
I wondered about the potential conflict of interest, but he was a reputable, established agent with a reputable, established agency and didn’t have an issue with it.