8M // Real Estate & Home Builders Guide // April 2017
THINKSTOCK IMAGE
BUYING
NEW
BEFORE
SELLING
CURRENT
PROPERTY
IS RISKY
BUSINESS
By Ilyce Glink
and Samuel J. Tamkin
Tribune Content Agency
Q
A
: Is it smart to buy another home
before selling your present home?
: That’s a loaded question given the
lack of information you’ve shared
with us, but we’ll try to give you some
guidance.
As a general rule, you’d rather
know that you have a buyer in hand
to purchase your home before you go
out and buy another. Most folks can’t
afford to own two homes at the same
time. You might not have enough cash
on hand to put down the money needed
to buy the second home, or you might
need lender financing and your lender
requires you to sell or payoff the first
home’s mortgage to qualify for a new
loan for the next house.
Here’s how to think it through: If
you own a home and can afford to buy
a second home, get financing on the
second home and pay for all of the
expenses of having two homes, you
can go ahead and own two homes at
the same time. Presumably, you can
move from the first home to the second
one and, when ready, sell the first
home. Again, only people that have the
means to carry two homes would want
to do this. If you don’t have the means
to carry two homes, it could be a
recipe for financial disaster. The costs
of carrying both properties could eat at
your savings, retirement accounts and
other financial lifelines that you have.
It can be a risky proposition and it’s
definitely not for the faint of heart.
There are times that the closing
dates on a purchase and sale might not
match up perfectly. In this situation,
you might close on your purchase -- if
you can and your lender lets you -- and
then several days later close on the
sale of your original home. But, we
don’t think that is what you are getting
at. What you are basically asking is
whether you should sign a contract
to buy a home when you don’t have a
contract for the sale of your existing
home.
Here are some suggestions you
might find useful. One solution is
to put a home sale contingency in
your offer to purchase the new home.
That is to say, you offer to buy a
house and that offer is subject to your
ability to get a buyer for your current
house. Many form contracts have
this language in them while others
have attachments you can add to the
contract to set this up.
If you create this contingency, you
buy yourself some time to get the
home you want and find a buyer for
your home. If your buyer does not
materialize after 30 or 60 days, the
contract to buy the new home could be
cancelled.
However, you’ll need to make
sure that you abide by the dates in
the contingency. Failing to abide by
the dates and notice provisions of the
home sale contingency could cost
you your earnest money, so if the
contingency says you must notify the
seller if you have a buyer for your
home by a certain date, you better do
that. And, if the contract says that you
must notify the seller that you have
not found a buyer, you must do that as
well, in writing, and on or before the
date stated in the contract.
For more details, please consult
with a real estate attorney.