Buying While Selling? Tips on Juggling Two Escrows
(ARA) - The obvious signs of summer are here. April showers have brought May flowers and For Sale signs are making their annual appearance on neighborhood lawns, marking the beginning of the summer home buying and selling season.
Buying a new home is often one of the most exhilarating events a family experiences. But this excitement can be replaced by anxiety for buyers who are selling a home at the same time.
Buyers who are purchasing a new home while selling their old one try to close on both properties at the same time to ensure a smooth move. Although all parties may have the best of intentions, the properties may not close concurrently. Buyers fear the idea of paying for two mortgages at the same time, or moving the family after school starts.
What can home owners do to mitigate this problem?
"Many borrowers do not think of buying and selling a home as one full transaction, and therefore, they tend to think of the "buy" and then they are chasing the "sell" transaction," says Tony Meola, executive vice president of home loans production for Washington Mutual. "We recommend several strategies to people who are buying and selling a home at the same time. If a buyer plans properly, he or she should be able to ease out of the old home and into the new one without too much difficulty."
Meola said that people should first find a qualified real estate agent and a mortgage expert.
"A mortgage loan consultant from Washington Mutual will pre-approve prospective buyers for you. As a seller, you should negotiate only with buyers who are pre-approved to purchase your house," says Meola. "And, have the loan consultant pre-approve you. As a buyer, you want to know how much house you can afford, so you can present yourself to sellers as a qualified buyer to purchase the house you want."
Meola also says that it's important to allow extra time in the home buying and selling schedule if you are buying and selling at the same time. "This advice seems obvious, but list your house for sale long before you plan on buying, if possible. When you get an offer, negotiate the escrow period to accommodate your purchasing needs," says Meola. "If that's not possible, ask to rent your old house if you haven't closed on your new one -- then you won't have to move twice."
Sellers may be able to mitigate their concerns by accepting a lower offer that allows more flexibility on the closing date. "For example, if the high bidder has to sell his or her house first, you might be better off selling to a first-time homebuyer," Meola points out.
If you are planning to buy in a competitive market, you may need to make your purchase before selling your current home. In this case, buyers can borrow a down payment until their existing home sells. This is called "bridge financing." There are also common and necessary contingencies that should be included in a purchase offer.
"For example, consider adding a clause stating that your offer is contingent upon the successful sale of the property you currently own," says Meola. This contingency prevents the buyer from forfeiting their earnest money deposit, or making two mortgage payments at once.
"In some competitive markets, buyers make contingency-free offers in order to be more attractive to sellers," says Meola. "Anyone using this strategy should plan to obtain interim financing. We advise doing this even if the former home is sold, but not yet closed. If you make a non-contingent offer and the sale of your existing home falls out of escrow, you could lose the deposit you placed on the new home."
This site is no longer updated.
Click this link to have updated family&home news and articles.
About the Author
©2005 All rights reserved
Courtesy of ARA Content
Courtesy of ARA Content