My lawyer's counsel is conservative and wise. I certainly don't want to own two homes at once. But his advice also leaves me with the huge expense of having to sublet an apartment for a few months and pay movers twice. Surely, I'm not the first person to try and sell one home and buy another. So I decided to call Diann Patton, a real estate agent with Coldwell Banker, to ask for some advice on how to avoid extra expenses and unnecessary headaches. Here's her advice:
1. Add a Contingency to the Contract
As we all know, we're in a buyer's market. So sometimes a seller may be willing to accept an offer on his property even if the terms aren't ideal.
In my case, Patton recommends I ask a seller to accept a contingency in the sales contract that I will purchase his property only after my existing home sells. In other words, if my seller backs out, I can renege on my commitment to purchase the new home without any financial risk.
Patton admits that getting a seller to agree to this sort of contingency can be difficult, especially if a buyer's existing home isn't already on the market. Someone like me, however, may have an easier time since my apartment is already in contract. Indeed, Patton believes most sellers would agree to the closing contingency once my buyers have inspected my home and have a commitment letter from a bank that they will get a mortgage.
There is, however, a potential downside to this type of contingency clause. My real estate agent, Ellen Quinn, who works for Tarvin Realtors in Ridgewood, NJ, informed me that asking for this concession may cost me some negotiating power with the sellers. So I could get the insurance policy I want, but I would also possibly end up paying more for the home.
2. Rent From the Buyers
Another common solution to my problem is to ask our buyers if we can remain in our home after closing and pay them a rental fee until I can purchase a new house. In some cases, folks don't need to move in right away and may be happy to make a little money subletting to the previous owners, says Patton.
Unfortunately, I didn't think of this solution before we signed the contract with our buyers. And even if I had, I may not have introduced it during our negotiations since I would not have wanted to do anything to dissuade the couple from buying my home.
So what will I do? At this point, I need to sit tight. Once my buyers get their commitment letter, I can decide just how much a closing contingency will cost me. In the meantime, I'll just keep shopping around and hope to find some empty nesters who want to unload their cozy Tudor at a fair price.
Would you buy a new home before selling your existing house?
Stacey Bradford is the author of The Wall Street Journal Financial Guidebook for New Parents.
Front Door image courtesy of Flickr, CC 2.0.
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