Sell Existing Home While Building New (mortgage, mortgages, sales, fees)

[girlbuffalo1]

We have decided to go ahead and build a new home starting--well very soon. Our current home has been on the market for 5 weeks and has had around 20 showings (is this pretty good?)--but no offers. Right now we are asking what is comparable to other homes in our subdivision and what we would 'love' to have as a sale price. It is priced within $5,000 more or less than other homes in our neighborhood. We have around 70% equity in our home so we don't owe very much. We also have the benefit of having enough for the 20% down on the new contstruction with the new lot so as to avoid PMI etc. We have been preapproved by our bank and have the letter ready for the builder.
In our situation what would be your plan of action on selling our existing home.

Our inital though was that we would list for what we would 'like' to get now and then once the house was about half complete drop $5k in cost. Once the home is completed (probably around christmas) if it hasn't sold we would consider dropping another $5k-$10k.

Does this plan make sense?

[mjohnson185]

If you have the equity, offer to pay closing costs for your buyer. You will sale fast! In this economy, buyers are sometimes having to sale there home without profit from appreciation, so they are having to come up with the closing costs themselves...if you can even raise the price by $2,000 and you would probably have a buyer. Less they have to come up with!

[girlbuffalo1]

How do you offer to pay closing costs ahead of having an offer--is the home listed with this information?

[mjohnson185]

Yes, you mention this ahead of time on your MLS listing and any advertisments you may have.

[chet everett]

Wait a second, you are going to START building "very soon" and you think the home is going to be completed by Christmastime?

Where? What sort of builder?

I would be very careful that I do not end up with no place to live.

In a general sense it is smart to sell before you buy, but with new construction there are OFTEN very aggravating delays of months. If you sell without some GUARANTEE from your builder you could have the expense and hassle of having to move into a rental or motel.

The other thing that I would be VERY concerned with is the idea that you can "start at what we would like to get and then drop $5K and then if it still does not sell another $5 or $10". Unless you live in an very very very affordable home NO ONE will care if you drop your asking price by $5K ESPECIALLY when you have been on the market for MONTHS and when you have a plan to then cut again as it is near YEAR END you can bet that not too many buyers will not realize that they can wait more than you can...

Whenever you put your home on the market you should price it where it will garner the attention of interested and qualified buyers and sell quickly. If that means that it is priced the same as comparable homes then it better show MUCH better than they do and offer no negatives. Being within "$5k more or less" is not an option! If you price above what recent sales suggest buyers are willing to pay in your area it will not matter if you cut your price down the road because there is no telling how few buyers there will be down the road. In almost every part of the country real estate markets go very slow from early November to late winter. Only very large percentage price cuts serve to attract attention of buyers even in boom years during the year-end lull...

[girlbuffalo1]

They are a custom home builder--all custom home builders in the area (Lafayette Indiana) have quoted time frames of 4-5 months for a build since most of them aren't very busy (due to not having many jobs right now).

If we end up selling before we are built we will put the furniture and move in with the in laws for a few months (they live a subdivision over from us)

Our home is a 8 yr old subdivision home on a small lot. most of these homes in our community are listed for 100k-120k and we have ours priced at 105k. There are 4 homes for sale in our subdivision--one listed at $145k but newer and bigger, one at $102k similar model but less upgrades, one at $112k similar model with slightly larger yard but no fence/patio, and one at 100k which has been on the market awhile and has barely any yard and no upgrades at all. So we thought $105k seemed an ok place to be since we have a professionally installed fence, slate 10x20 patio etc.

Dropping to $100k will put as at the bottom of the comparables and dropping to $90k will put us well below--

Chet- So since we have been on the market 5 weeks already should we cut now--or are you already saying we are too late and should have started lower and now will never sell? We are ok with having to pay double mortage for a few months--lets say into early spring but wouldn't want to go longer than that.

[chet everett]

I can't say that you will never sell, but the idea is that in a falling market you really really need to watch not the houses that are LISTED but that have sold.

I don't mean to be a downer, but the reality is that the unsold houses are not competition as important as the stuff that came on the market and was snatched up. Now in rising market where inventory is tight the other houses that are listed might be decent place to set your price but as cruel as it sound in falling market with excess inventory you are kinda forced to undercut the other places. Of course if that means you would make no money / sell at a loss you have to decide whether you want to stay on the sideline or NEED to sell / move...

I really feel for you, but you cannot "manufacture" buyers only entice someone that feels "at this price we can't loose" but sadly you as a buyer might end up in a rough spot... As the summer ticks away I am sure that your midwest climate and school schedule will further embolden buyers to only make low offers. That is generally the pattern even in far more costly Chicago area where I live...

As to the question of the custom home, I would be very very reluctant to build now unless you really have searched long and hard for an existing home that would meet your needs.
So many builders are in such bad straits there is increased risk of them not having the funding to meet their commitments and by building new they increasing the pool of new houses that may further make it hard to sell an existing. Of course if you can get EXTREME price concessions that MAY make it hard to pass on offer, but at some point those concessions cuts into the ability of the builder to use the right subcontractors and materials... Be extra vigilant that a low price is not also hiding an inferior job!

Good Luck!

[PotterGeek]

I'd say if you've had 20 + showings with no offer, you're priced too high...and there is no way I'd build or buy another house in this market without having sold my existing home first.

[tamitrail]

I know you said you have about 70% equity in your home....but how do you know that when you don't know what it will sell for? And what about the fees you have to pay? Next, if you don't sell, will you be approved for a mortgage on the second home? If so, can you carry both mortgages on both homes for an undisclosed period of time? You said until the Spring? Do you have definite confirmation that you will be approved to carry both homes until the Spring? You may be OK with it, but is your mortgage company?

[PotterGeek]

It is a recipe for disaster. If you don't believe me, look at past post history in this forum of all the poor souls who bought/built before they sold....I bet most of them wish they would have had the foresight to do it differently.