Hi Caitlin S., Here is Caitlin's Real Estate Newsletter for Tuesday, August 23, 2022
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Caitlin S. Parenteau, ABR®, PSA
Caitlin S. Parenteau
REALTOR® Sales Associate, ABR®, PSA
C. 973.224.4820 | O. 973.729.6111
cparenteau20@gmail.com
Coldwell Banker Realty
24 White Deer Plaza
Sparta, NJ 07871
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Is This Your Situation: You Need To Sell Your Current Home and Buy a New One Simultaneously?

 

Everyone warns you that buying your first home is complicated, and they're right. Negotiating a mortgage for the first time takes you along a steep learning curve. However, when you buy your second house, you find that a home purchase is even more complex when you don't have cash on hand. Starting the process of buying your new home before you've sold your previous one usually means approaching home sellers without liquid cash for a down payment and without a clear idea of when you'll be able to liquefy the cash in your old home. Below are a few different ways to handle this tricky situation, and the pros and cons of each.

Option 1: The contingent offer

Before listing your home, you find a target home and make an offer. In your offer, you include a clause called a sale contingency, which stipulates that the offer is withdrawn automatically if your current home does not sell in a particular period of time.

  • Pros: With your home purchase lined up ahead of time, you have a shot at timing your home sale perfectly. You might be able to make the sale, make the down payment on your new mortgage and move in, all in the same month.
  • Cons: The home seller may not accept your offer. As you'll realize when you sell your own home, a contingent offer comes with a lot of uncertainty.

Option 2: The bridge loan or HELOC

You buy your target home using a short-term loan that covers the cost of the down payment and pay off the loan when your current home sells. You can do this using either a bridge loan, which is unsecured, or a home equity line of credit, which uses the equity in your current home as security.

  • Pros: They're convenient for both you and the home seller.
  • Cons: Taking out more loans means dealing with more fees — not to mention lots of forms and paperwork.

Option 3: Selling first

You sell your home and move into a flexible rental while you look for a new home.

  • Pros: You don't have to worry about lining up your home sale and purchase perfectly, and you can approach sellers with cash in hand.
  • Cons: You have to go through the apartment-hunting process and an extra move. Admittedly, you don't have to find a perfect rental, but if you don't, you'll wind up living in a less-than-optimal rental for a few months.

This is just a summary — there are other factors to consider. Just keep in mind that selling your home and buying a new home without cash on hand are both stressful and time-consuming processes, and doing them at the same time is even more stressful. If you need someone to talk through your options and help you understand what's best for you, call us today.

 
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The information provided in this email newsletter is for general guidance only, and does not constitute the provision of legal advice, tax and accounting advice, real estate investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional real estate, tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Home value estimate calculators provided herein are general estimations based on publicly available data and should not be used as a substitute for a professional appraisal. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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