Selling Your Home: Timing Is Everything
Congratulations, You Own Two Homes
Don't Go There
Don't be overly optimistic about selling your home quickly if real estate sales in your neighborhood have been at a standstill for the past six months. If sales are down, it's not a good idea to buy a new home before you sell your old one unless you've got enough money to hold two mortgages for a period of time.
Just imagine that you're out driving around one Sunday afternoon and suddenly, you see it. It's the house you always wanted, but have never seen before. And it's got a sale sign in the front yard. The minute you saw it, before you even noticed the sign, you knew you were destined to live there.
You go right home and grab your spouse, babbling all the while about this perfect house. Your excitement is contagious, and by six o'clock that evening you've made an offer. You lie awake all night, planning where you'll put the piano and what color curtains you'll get for the guest room.
The next day, you learn that the seller has accepted your offer, and you set a settlement date for 30 days out. You're absolutely thrilled, until you suddenly realize that unless you sell your current home within a month's time, you'll own two homes.
How in the world could you afford two homes, even if it's just for a little while? Well, know that while this situation sounds frightening, it occurs all the time. Most buyers who already own a home will agree to make an offer on a new home with the contingency that they must sell their current property before buying the new one. This delays settlement for the sellers until they've sold their house. If a cash buyer comes along, however, the seller does not have to hold the house for the contingent buyer.
Read up on swing loans; this nifty innovation allows you to buy a home before you sell the one you're in.
Swing loans are mortgage loans that use your first property as collateral for the second home. You'll be required to sign a mortgage note, but you'll only pay interest until your first property is sold. When you sell the property, you repay the loan and satisfy the mortgage.
Owning two homes is sometimes necessary. If you're going to be in that position, just be sure that you think through how you'll manage financially until your current house is sold.
Where Is the Nearest Hotel, Please?
Most contractors try to stay pretty well on schedule with new construction, but sometimes delays occur. If the buyers of the new construction timed their settlement in anticipation of the pre-delay construction schedule, they could be in for a period of homelessness.
On the other end of the owning-two-homes spectrum is the dilemma of being temporarily without a home. Sometimes, a house sells much faster than anticipated, or its sale is contingent on the buyers being able to move in very quickly, forcing the sellers to make settlement on their home before they've bought or settled on a new one.
Being between houses isn't completely bad, although most people avoid it if they can.
On the plus side, you will have sold your house, clearing the way for you to go ahead and look for a new one. On the minus side, you'll need to find a place to store your furniture—not to mention yourselves—until you find a new home, wait for your settlement date, or wait on new construction.
Many people bunk in with family rather than stay in a motel, but you probably know how living with relatives can get a bit, shall we say, stressful? Hopefully, your timing will work out right, and you can avoid this situation. If your timing problem is due to a construction delay, ask the builder to reimburse you for hotel costs.
More on: Buying and Selling Your Home
Excerpted from The Complete Idiot's Guide to Personal Finance in Your 40s and 50s © 2002 by Sarah Young Fisher and Susan Shelly. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.
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