We have bought 2 houses but have never sold, so I’m a bit uncertain how this works. (kept our first house as a rental.) Family is no help for advice as they all live in places with very different markets to here.
The set up is that we live in the Bay Area, which means that our current house could sell over asking price and in a matter of days…while to buy something could take 6 months and 10 offers before something actually clicks and we go into escrow. We need the profits from our current house to become the down payment on the new house; we don’t have the cash saved up. We can carry 2 mortgages for up to 60 days if needed.
How do we time this all to work out correctly? How do we get approved for a loan with a big downpayment (20%) before having it cash-in-hand?
We are meeting with our real estate agent to ask these questions too but the SDMB is full of real estate-savvy people with great advice…
If your first house will sell pretty much instantly and at a markup, don’t put it on the market until you’re ready to pull the pin on your next house. Buying contracts have contingencies for this sort of thing: you bid on a house contingent on selling your prior one. It’s quite common, although it does put you at a disadvantage vs someone without those contingencies in their offer.
If you simply must sell before you have a new place on the line (perhaps fearing the market will tucker out before you sell and get the money you expect), be prepared to rent living quarters in the interim.
I’ve bought and sold three houses this way over 20 years.
ETA: Or just talk to your real estate professional instead of the internet. If you’ve bought two properties, surely you have someone you trust at this point?
ETAETA: that sounded snarky, which wasn’t intended.
The OP’s problem is exactly the reason there is so little inventory in the Bay Area - buyers are scared.
squeegee’s advice is not going to work because lots of buyers bring cash. Anyone bringing a promise of cash when they sell their house is not going to get very far in the bidding.
Are you trading up or down? I ask to see how much money you’ll have left after the sale. The only thing I can think of is to sell, rent, then buy. Would be easier if your tenants move out which would let you get into your second house in the interim, but I bet you’re not that lucky.
Me, when I go I’m moving someplace cheap, just about anywhere in the country except the middle of Manhattan.
I’m under the impression that putting an offer in contingent on sale is extremely uncommon these days. It’s a holdover from when no one would accept them during the housing crisis.
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How do we get approved for a loan with a big downpayment (20%) before having it cash-in-hand?
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You don’t. We will be closing next week on two houses (buying one, selling one - in that order), and they cannot factor that into their loan documents. You’ll have to qualify as if you had to make payments on both at the same time.
Which offer did you choose? When we sold our house in NJ we didn’t accept a contingency, which turned out to be a really good move. Did you get any cash offers?
I’ll admit offers without a selling contingency were looked at more favorably than ones with. When you say “cash offer”, do you mean “no contingency”, or literally full price in cash? You can’t mean the latter, why would I care if the money came from a bank account versus a bank loan?
Met with our real estate agent, and he suggested something interesting.
First, contingent offers aren’t very strong, when competing with all-cash offers, like you get a lot here in the Bay Area. You can do them but its not a strong position to be in.
But, its still possible even nowadays to get a loan with 5% or 7% or 10% down, if you are a good credit risk. So someone trying to sell and buy at the same time, can get a loan with their 5% down payment, close on the house they want. Sell their old house and then refi into a new loan on the new house using the cash you just got out of the sale.
Not sure what I think of it, and I have some research to do, to understand the implications better but its something I hadn’t though of.
On the upside, our current house would sell right away in this market, he confirmed, so we’ve got that going for us.
Um, because I’ve never even heard of someone who can pony up a million+ dollars (the price I sold my house for), full price, in cash. That’s why. People do that? At these nosebleed prices?
Why is your deposit for your new house too much larger than the deposit received from the house being sold ?
So you can sell to them
Did you ask the buyers if they can delay ? Sure you fix the price but not the day of hand over… The buyers may be happy to delay closing 6 months … for the reason that they now have to sell… If you are both agreeing to delay, the delay can go on for ever, The contract can say when the either party, whoever is first, says "its time " the final settlement/ hand over occurs within 4 weeks.
You would also have two rental incomes to pay two mortgages. You might not ever sell any property… 3 houses
That usually just means it’s a contract with no financing contingency. It doesn’t necessarily mean that the cash didn’t come from a bank or other loan.
Put your house on the market now. If it sells as quickly as you think it will you can rent something on a month-to-month basis until you find a home to buy. Not risk free, but doable.
Do what I did. Go house hunting. When you find a house you want, contact the sellers agent and sign them to sell your house. I presented it as “Hey, if you work this right you make 2 commissons at the same time”.
Right but don’t the lending companies look at your bridge loan when qualifying you for the new loan, and calculate accordingly? Won’t we look way over-leveraged?