How to Buy a New Home While You Sell Your Old One in Brooklyn (or anywhere else!)
Often times I am asked by consumers “how do I go about purchasing another home when you have to sell the one that I presently own?” This is one of the oldest questions in the history of real estate and the answer is quite complicated. The goal of this article is to educate consumers on this process and offer insights to help make this process go as smoothly as possible.
Basically when you undertake selling one property and purchasing another you are looking at a double edged sword. On the one side if you start looking for a home to purchase before you sell your existing property (assuming you need the proceeds from your sale to finance your next purchase) you may place your self in a position where you are desperate to sell. As an example, if you see a house that you fall in love with, or let’s say you find an incredible deal, being that you need to sell your existing property before you buy, you are going to have a hard time. If you have not sold your home you will need to request a contingency on your offer regarding the sale of your existing home.
Here in Brooklyn, it is rare that a seller will give you that contingency because it leaves too much of a legal loop hole for a buyer to back out of the deal. In other words, if you as a buyer change your mind after the fact and decide you no longer want to purchase the new house, you can make sure you do not sell your existing property (it is quite simple to sabotage your own deal on the sell side before you go to contract) and back out of the deal on the new property. Now some may say that there may be a seller willing to give you that contingency, but the only reasons a seller in Brooklyn would give you that contingency would be if a) you are buying all cash with no mortgage contingency or b) you were the only offer on the table and OVERPAYING for the property (which you do not want to do).
Bear in mind that when you go into contract on the new property you will also have to write out a down payment check at the signing of the contract, usually they will want 5-10% of the purchase price so either way you would have to have that money handy. In the past when I have tried to get a homeowner to accept an offer contingent on a sale, the seller would ask if the old property is in contract, on the market and/or fielding offers. Again, this is where the problem lies, if you do not have your home on the market, the seller of the new property is going to be scared that you will not be able to affect the sale of your existing property in a timely fashion.
Based on all of this, if the consumer finds a property they want to purchase, they will be pressured to get their home sold quickly and therefore may be forced to have to sell their home for less in order to guarantee a timely sale to salvage the next purchase. Often times a homeowner has said to me the following “I do not want to put my home on the market yet because I first want to find a place to buy.” If you go that route, just be prepared to sell your home for less to make a quick deal.
On the other edge of the sword is the consumer who puts their home on the market feeling the need to get a deal on their property first so they will not have the above-mentioned problem. However, this sometimes creates new problems. Mainly, if a buyer comes into your home and gives you a fantasgreat offer, you will be under duress to find a place to buy. Basically this means you may have to spend more on the house you want to purchase in order to make a quick deal on the buy side.
This is the double edged sword in a nut shell. Ultimately, the later is the better problem to have. “Why” you may ask? This is due to the fact that when you sell you can always slam on the brakes if it becomes problematic finding a house to buy. You also have many options that can help. As an example, you can go into contract on a deal with your existing property requesting that the buyer give you more time to close. Another option would be to close but negotiate a deal whereby you can stay in your existing house for sometime after the sale (like 6 months for example) in order to find a home to buy. If you do that be prepared to pay the purchasers mortgage interest and real estate taxes on a per diem basis. Usually you will also have to place some money in escrow to insure that you do not damage the house prior to moving out. Yet another option would be to rent temporarily until you find a new permanent home.
In my humble opinion the best thing to do is to get started with both the purchase and the sale at the same time. In other words, put your home on the market and start showing it to perspective buyers and fielding offers. Remember, you will not be accepting an offer unless you fell comfortable with the fact that you will be able to find another home. You can even hold the potential buyers for your house at bay if need be while you look. At least you will get an idea as to how buyers perceive your home and hopefully get several offers to give you an idea as to what your home can sell for.
While you’re doing that you can also start looking at homes to purchase. The hope is that all the “planets align” and at the same moment that you get a great offer you will also find the perfect home for your needs. I will tell you this; I have helped homeowners through this process since 1993 and have done it hundreds of times. It seems as though the “planets align” quite often. The important thing that also makes it work is when you as the consumer make the conscious decision that you want to make a move. If you really want it, it will happen. Always does and always will!
If you have a question or comment regarding this blog entry, submit them below or contact me direct. Thanks for reading!
Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
Web sites: www.MitchellFeldman.com and www.MadisonEstates.com
© Copyright by Mitchell Feldman. All Rights Reserved. Republication or redistribution of this material is expressly prohibited without prior written consent by Mitchell Feldman. This information is deemed reliable but not 100% guaranteed. Mitchell Feldman is not at attorney and therefore not able to give legal advice. If you are involved in a real estate transaction and have a question, besides speaking to Mitchell, you should also speak to your attorney.