Found a house we like but need to sell ours, need advice (contingent, disclosing)
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Hi, my husband and I live in the Raleigh NC area and we found a house we like and don't think that it will sit for long, and it seems to be a good deal in a subdivision I never thought we'd be able to afford to live in and is perfect for our daughter. However we haven't even listed our current house for sale. What is the best way to go about this? I think we could afford both mortgages but I don't want to do this for more than 2-3 months. Closing on the new home first (before selling ours) would also mean we won't have the 20% down payment but once our home sells we would have that. We're considering attempting a contingency offer and/or requesting a closing date 60 days out, perhaps our house will sell by then.
Also a related question - is it beneficial to have the listing agent of the new house list our house? The town of the new house is about 20 minutes from where we live if that helps. We got the listing agent to show us the new house which in hindsight may not have been the best idea (a buyer agent may have been better) but oh well. Thanks.
we haven't even listed our current house for sale.
I think we could afford both mortgages...
What is the best way to go about this?
"best" is subjective... but if speed matters do your homework to KNOW whether the
absolute minimum you need to get out of the sale (after paying off the mortgage,
doing the prep work for sale, marketing and agent commission fees, negotiating with
a buyer, etc) and how that number relates to your market comparable sales.
iow... can you manage to sell now without a loss? If not, can you afford that loss?
A really conservative seller might want to include the closing, the moving and the
inevitable furniture and decorating costs to move into the new house
as part of that first 'affordability' number.
There's a few considerations here - chances are the home you wish to buy will not accept a contingent contract (ie, your offer subject to sale and settlement of present home). There is a way you can have your cake and eat it too, but the motivation (and the qualifications) must be high. There are lenders out there that will allow the use of rental income without regard to equity on the rental, and, will not require a lease in hand, they will use the fair market rental value. You would have to have at least 10% down on the home you are purchasing and set up a combo mortgage on the purchase. This is done this way for two reasons. One, to avoid PMI and two, to pay off the 2nd so you are not setting yourself up for a refinance. The credit score requirements for the new loan are high, as are the reserves (retirement accounts anywhere?), but this can be done (and is being done) without a contingent contract.
As for using the same agent......don't you think you deserve someone that has only your best interests at heart?
If you don't have enough money for a down payment without selling your present house, it seems that you have only two reasonable options:
1) Sell your house first before you make an offer on another house.
2) Make you offer contingent on closing the sale of your present house (which will put your offer at a distinct disadvantage).
I would strongly recommend against trying to push the closing date out 60 days in the hope that your present house will be sold by that time. There is a high likelihood that you will not be able to close on your home sale within 60 days. You would lose any down payment you would have made on the new house; and it is unfair to the home seller if you are unable to close after 60 days.
Take some time, get your house listed and ready to sell (get another agent, too), and see what happens. Even if you can't get the house you want to purchase now, something else may come along that you will like just as well. Good luck.
If you don't think it will sit for long then it doesn't seem to make sense to offer. Your offer would be weak. Your home isn't even listed on the MLS so the seller has no way of knowing if you will be competitively priced to sell. Second if you don't have enough reserves, then I doubt you will get a second mortgage and qualify for two payments. While it can be done, it is difficult. It doesn't matter what you think you can do, it only matters what the lender will allow you to do. Third, I can't imagine you can write an offer without disclosing that you need your home to sell. That is material to the contract, unless NC interprets things differently than Oregon. We don't allow financial misrepresentation in contracts without consequences for the buyer.
Get a buyer agent. MikeJaquish on this forum is in Cary. I don't know how far Raleigh is and if he covers it, but if he doesn't he might be able to refer you to a good buyer agent there.
I think we could afford both mortgages but I don't want to do this for more than 2-3 months.
I didn't need to read past this. You "think" you could afford both? For maybe 2 or 3 months? You are heading down a path of a possible horrific financial decision.
Thanks everyone. To clarify, I used Bankrate's home affordability calculation to determine how much of a mortgage my husband and I would qualify for based on our income, and the amount is over my current mortgage and the new loan combined. We do have enough in savings to cover making two mortgage payments for well over a year but I don't want to drain our savings over this. I need to find out the average DOM for homes in my area and type of neighborhood. As for using a buyer agent, if we end up looking for a different house I will definitely do that, but the listing agent has already shown us this home so I can't get another agent to show it again.
While the 'found' house may be amazing, there is absolutely no shortage of properties available (or coming available) in almost every neighborhood. Additionally, there are very few areas in the country where prices have clearly 'bottomed-out' and are starting back up. If you seriously shop the area and keep your eyes open, there is probably a good liklihood that you will find a comparable property ... when your existing property sells. The 'problem' you open yourselves to by moving ahead with the second property, is that you have no assurance when your current property will sell. Some homes are sitting on the market for a year or longer (Could you financially afford that ... and does the added expense really make sense?).
If you really feel compelled to move ahead, you might consider (1) contingent on sale offer (not much liklihood of acceptance); (2) Lease-Purchase option that would allow you to accrue funds toward your downpayment and also give you an 'out' if property 1 did not sell; (3) An offer reduced by the 6-month cost of 'sitting on both properties'; (4) some other arrangement witht the seller that met both your interests/needs (?) ...Never hurts to have the conversation.
As for using a buyer agent, if we end up looking for a different house I will definitely do that, but the listing agent has already shown us this home so I can't get another agent to show it again.
This is an erroneous statement. If you want to hire a buyer agent you can. You are under no legal or moral obligation to use them as your agent.
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