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Location: Halfway between Number 4 Privet Drive and Forks, WA
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Do you have at least 30% equity in your old home? If not, a lender probably won't let you buy another home anyway (because of all the buy and bail scams).
If your current home is listed for sale you may want to wait until you have an offer before your make an offer on your new house, so that you do not have to make a contingent offer. That way you minimize any risk of having to make two payments.
Personally, I would still make it contingent unless it had actually closed! On the other hand I don't know your market or income stability. Other things to consider before making a decision - interest rates seem to be going up - what are prices currently doing - how specific is your criteria as a buyer - also bank owned properties in my area won't even counter an offer with a SOP contingency. Talk to your banker and your agent and make the decision on your specific location and market. In my market the offers with the fewest contingencies tend to increase the buyers position of power when it comes to final price.
Technically eric is correct, that unless you are really truly and completed CLOSED on your existing house a contingent offer is your safe bet. Of course that presumes that you have some place to LIVE, whether that means renting from the buyers of your old house or moving twice...
That said you can think about what sorts of clauses you would put on an offer with much more precision one you have a closing scheduled. If you go to escrow and the person you are making the offer to buy from understands this for what it is, even in today's mixed up market, a pretty good bet that you will close then the seller would be silly not to accept that contingency.
I agree with everything that Chet said. A few things I might emphasize:
If the house you are buying is such a good deal, what does that say about the price you are likely to get on the property you are selling? It is not worth what it might have been two years ago......
In this market, you do not want to try to sell a vacant house. Furniture helps stage your house and make it feel warm. Remove the furniture and you are suddenly competing with bank owned homes.
We went to the bank and were given the go ahead if we wish to put an offer at the full asking price (if we needed to) on the new home even with our existing mortgage (my husband is VERY frugal LOL-- he is right at the 800 credit score point while I am at 750). It puts us right below that 40% of income point that they like to use when approving. Here's some more info:
Current Home: We owe $39k, it is a 3bd 2bath ranch built in 2001 on a small subdivision lot 1250sq ft--not the greatest subdivision (some foreclosures etc). We are thinking to list it at $105k as that is what is comparable to what things have been going for. We would most likely be willing to go as low as $98k.
Potential Home: Listed at $242k. We are considering an initial offer of $225k --is this insulting?
We have around $50k free and clear for a downpayment.
While we could afford to spend 39% of our income and have both mortgages going the shock from going from $600 a month to around $2000 in mortgages is scary. Both of our jobs are rather secure but still.
A possible scenario is that we borrow the money from my husbands parents for the $39k. We will then close out the mortgage on our existing house and make an offer on the potential house using the $50k as the downpayment. With our house listed when it sells we will pay his parents back their $39k take the remaining $50k and use part of it down on the new house and keep some in savings.
Also we thought we would keep all of our major furniture in the house for staging and just move all the junk and what not to the new home. Being that this new home is much bigger (3000+ sq ft) we will need to be buying a second sofa, a guest bed etc for it anyways and we would already take our extra entertainment center outdoor/indoor table and chairs and extra bookshelves and nightstands etc to declutter the existing house anyways.
Last edited by girlbuffalo1; 06-12-2009 at 08:44 PM..
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